Correlation Between HP and VanEck ChiNext
Can any of the company-specific risk be diversified away by investing in both HP and VanEck ChiNext 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 VanEck ChiNext into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and VanEck ChiNext ETF, you can compare the effects of market volatilities on HP and VanEck ChiNext 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 VanEck ChiNext. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and VanEck ChiNext.
Diversification Opportunities for HP and VanEck ChiNext
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HP and VanEck is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and VanEck ChiNext ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck ChiNext ETF 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 VanEck ChiNext. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck ChiNext ETF has no effect on the direction of HP i.e., HP and VanEck ChiNext go up and down completely randomly.
Pair Corralation between HP and VanEck ChiNext
Considering the 90-day investment horizon HP Inc is expected to generate 0.45 times more return on investment than VanEck ChiNext. However, HP Inc is 2.2 times less risky than VanEck ChiNext. It trades about 0.13 of its potential returns per unit of risk. VanEck ChiNext ETF is currently generating about -0.06 per unit of risk. If you would invest 3,742 in HP Inc on August 29, 2024 and sell it today you would earn a total of 168.00 from holding HP Inc or generate 4.49% 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. VanEck ChiNext ETF
Performance |
| Timeline |
| HP Inc |
| VanEck ChiNext ETF |
HP and VanEck ChiNext Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and VanEck ChiNext
The main advantage of trading using opposite HP and VanEck ChiNext positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, VanEck ChiNext 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 VanEck ChiNext will offset losses from the drop in VanEck ChiNext's long position.The idea behind HP Inc and VanEck ChiNext ETF 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.| VanEck ChiNext vs. Freedom Day Dividend | VanEck ChiNext vs. Davis Select International | VanEck ChiNext vs. iShares MSCI China | VanEck ChiNext vs. SmartETFs Dividend Builder |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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