Correlation Between HP and AirIQ
Can any of the company-specific risk be diversified away by investing in both HP and AirIQ 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 AirIQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and AirIQ Inc, you can compare the effects of market volatilities on HP and AirIQ 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 AirIQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and AirIQ.
Diversification Opportunities for HP and AirIQ
Excellent diversification
The 3 months correlation between HP and AirIQ is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and AirIQ Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AirIQ Inc 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 AirIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AirIQ Inc has no effect on the direction of HP i.e., HP and AirIQ go up and down completely randomly.
Pair Corralation between HP and AirIQ
Considering the 90-day investment horizon HP is expected to generate 1.56 times less return on investment than AirIQ. But when comparing it to its historical volatility, HP Inc is 3.54 times less risky than AirIQ. It trades about 0.06 of its potential returns per unit of risk. AirIQ Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 31.00 in AirIQ Inc on September 1, 2024 and sell it today you would lose (3.00) from holding AirIQ Inc or give up 9.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.95% |
| Values | Daily Returns |
HP Inc vs. AirIQ Inc
Performance |
| Timeline |
| HP Inc |
| AirIQ Inc |
HP and AirIQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and AirIQ
The main advantage of trading using opposite HP and AirIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, AirIQ 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 AirIQ will offset losses from the drop in AirIQ's long position.The idea behind HP Inc and AirIQ Inc 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.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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