Correlation Between HP and Absolute Health
Can any of the company-specific risk be diversified away by investing in both HP and Absolute Health at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining HP and Absolute Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Absolute Health and, you can compare the effects of market volatilities on HP and Absolute Health and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in HP with a short position of Absolute Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Absolute Health.
Diversification Opportunities for HP and Absolute Health
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HP and Absolute is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Absolute Health and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Health and HP is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on HP Inc are associated (or correlated) with Absolute Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Health has no effect on the direction of HP i.e., HP and Absolute Health go up and down completely randomly.
Pair Corralation between HP and Absolute Health
Considering the 90-day investment horizon HP Inc is expected to generate 0.14 times more return on investment than Absolute Health. However, HP Inc is 7.05 times less risky than Absolute Health. It trades about 0.01 of its potential returns per unit of risk. Absolute Health and is currently generating about -0.21 per unit of risk. If you would invest 3,552 in HP Inc on September 1, 2024 and sell it today you would lose (9.00) from holding HP Inc or give up 0.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
HP Inc vs. Absolute Health and
Performance |
| Timeline |
| HP Inc |
| Absolute Health |
HP and Absolute Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Absolute Health
The main advantage of trading using opposite HP and Absolute Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Absolute Health can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Absolute Health will offset losses from the drop in Absolute Health's long position.The idea behind HP Inc and Absolute Health and pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Absolute Health vs. American Leisure Holdings | Absolute Health vs. Supurva Healthcare Group | Absolute Health vs. China Health Management | Absolute Health vs. Embrace Change Acquisition |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.
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