Correlation Between HP and Global X
Can any of the company-specific risk be diversified away by investing in both HP and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Global X SP, you can compare the effects of market volatilities on HP and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Global X.
Diversification Opportunities for HP and Global X
Very poor diversification
The 3 months correlation between HP and Global is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Global X SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X SP 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X SP has no effect on the direction of HP i.e., HP and Global X go up and down completely randomly.
Pair Corralation between HP and Global X
Considering the 90-day investment horizon HP Inc is expected to generate 1.9 times more return on investment than Global X. However, HP is 1.9 times more volatile than Global X SP. It trades about 0.14 of its potential returns per unit of risk. Global X SP is currently generating about 0.2 per unit of risk. If you would invest 3,742 in HP Inc on August 27, 2024 and sell it today you would earn a total of 188.00 from holding HP Inc or generate 5.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. Global X SP
Performance |
| Timeline |
| HP Inc |
| Global X SP |
HP and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Global X
The main advantage of trading using opposite HP and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.The idea behind HP Inc and Global X SP 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.| Global X vs. Global X Conscious | Global X vs. Global X MSCI | Global X vs. Global X Alternative | Global X vs. VictoryShares 500 Enhanced |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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