Correlation Between HP and Ionic Inflation
Can any of the company-specific risk be diversified away by investing in both HP and Ionic Inflation 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 Ionic Inflation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Ionic Inflation Protection, you can compare the effects of market volatilities on HP and Ionic Inflation 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 Ionic Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Ionic Inflation.
Diversification Opportunities for HP and Ionic Inflation
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HP and Ionic is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Ionic Inflation Protection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ionic Inflation Prot 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 Ionic Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ionic Inflation Prot has no effect on the direction of HP i.e., HP and Ionic Inflation go up and down completely randomly.
Pair Corralation between HP and Ionic Inflation
Considering the 90-day investment horizon HP Inc is expected to generate 4.94 times more return on investment than Ionic Inflation. However, HP is 4.94 times more volatile than Ionic Inflation Protection. It trades about 0.06 of its potential returns per unit of risk. Ionic Inflation Protection is currently generating about 0.18 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 71.00 from holding HP Inc or generate 1.9% 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. Ionic Inflation Protection
Performance |
| Timeline |
| HP Inc |
| Ionic Inflation Prot |
HP and Ionic Inflation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Ionic Inflation
The main advantage of trading using opposite HP and Ionic Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Ionic Inflation 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 Ionic Inflation will offset losses from the drop in Ionic Inflation's long position.The idea behind HP Inc and Ionic Inflation Protection 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.| Ionic Inflation vs. iShares Dividend and | Ionic Inflation vs. Martin Currie Sustainable | Ionic Inflation vs. VictoryShares THB Mid | Ionic Inflation vs. Mast Global Battery |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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