Correlation Between HP and Aileron Therapeutics
Can any of the company-specific risk be diversified away by investing in both HP and Aileron Therapeutics 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 Aileron Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Aileron Therapeutics, you can compare the effects of market volatilities on HP and Aileron Therapeutics 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 Aileron Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Aileron Therapeutics.
Diversification Opportunities for HP and Aileron Therapeutics
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between HP and Aileron is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Aileron Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aileron Therapeutics 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 Aileron Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aileron Therapeutics has no effect on the direction of HP i.e., HP and Aileron Therapeutics go up and down completely randomly.
Pair Corralation between HP and Aileron Therapeutics
Considering the 90-day investment horizon HP Inc is expected to generate 0.68 times more return on investment than Aileron Therapeutics. However, HP Inc is 1.48 times less risky than Aileron Therapeutics. It trades about -0.11 of its potential returns per unit of risk. Aileron Therapeutics is currently generating about -0.39 per unit of risk. If you would invest 3,742 in HP Inc on August 29, 2024 and sell it today you would lose (328.00) from holding HP Inc or give up 8.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. Aileron Therapeutics
Performance |
| Timeline |
| HP Inc |
| Aileron Therapeutics |
HP and Aileron Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Aileron Therapeutics
The main advantage of trading using opposite HP and Aileron Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Aileron Therapeutics 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 Aileron Therapeutics will offset losses from the drop in Aileron Therapeutics' long position.The idea behind HP Inc and Aileron Therapeutics 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.| Aileron Therapeutics vs. Bright Minds Biosciences | Aileron Therapeutics vs. HP Inc | Aileron Therapeutics vs. Intel | Aileron Therapeutics vs. Chevron Corp |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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