Correlation Between HP and Champlain Small
Can any of the company-specific risk be diversified away by investing in both HP and Champlain Small 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 Champlain Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Champlain Small, you can compare the effects of market volatilities on HP and Champlain Small 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 Champlain Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Champlain Small.
Diversification Opportunities for HP and Champlain Small
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HP and Champlain is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Champlain Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champlain Small 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 Champlain Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champlain Small has no effect on the direction of HP i.e., HP and Champlain Small go up and down completely randomly.
Pair Corralation between HP and Champlain Small
Considering the 90-day investment horizon HP Inc is expected to generate 1.3 times more return on investment than Champlain Small. However, HP is 1.3 times more volatile than Champlain Small. It trades about 0.14 of its potential returns per unit of risk. Champlain Small is currently generating about 0.16 per unit of risk. If you would invest 3,447 in HP Inc on August 28, 2024 and sell it today you would earn a total of 483.00 from holding HP Inc or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. Champlain Small
Performance |
| Timeline |
| HP Inc |
| Champlain Small |
HP and Champlain Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Champlain Small
The main advantage of trading using opposite HP and Champlain Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Champlain Small 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 Champlain Small will offset losses from the drop in Champlain Small's long position.The idea behind HP Inc and Champlain Small 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.| Champlain Small vs. Washington Mutual Investors | Champlain Small vs. Baron Emerging Markets | Champlain Small vs. Aquagold International | Champlain Small vs. Morningstar Unconstrained Allocation |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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