Correlation Between HP and CITIC Resources
Can any of the company-specific risk be diversified away by investing in both HP and CITIC Resources 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 CITIC Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and CITIC Resources Holdings, you can compare the effects of market volatilities on HP and CITIC Resources 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 CITIC Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and CITIC Resources.
Diversification Opportunities for HP and CITIC Resources
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HP and CITIC is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and CITIC Resources Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Resources Holdings 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 CITIC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Resources Holdings has no effect on the direction of HP i.e., HP and CITIC Resources go up and down completely randomly.
Pair Corralation between HP and CITIC Resources
Considering the 90-day investment horizon HP is expected to generate 5.07 times less return on investment than CITIC Resources. But when comparing it to its historical volatility, HP Inc is 5.1 times less risky than CITIC Resources. It trades about 0.04 of its potential returns per unit of risk. CITIC Resources Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 8.13 in CITIC Resources Holdings on September 2, 2024 and sell it today you would lose (0.13) from holding CITIC Resources Holdings or give up 1.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 30.85% |
| Values | Daily Returns |
HP Inc vs. CITIC Resources Holdings
Performance |
| Timeline |
| HP Inc |
| CITIC Resources Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
HP and CITIC Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and CITIC Resources
The main advantage of trading using opposite HP and CITIC Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, CITIC Resources 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 CITIC Resources will offset losses from the drop in CITIC Resources' long position.The idea behind HP Inc and CITIC Resources Holdings 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.| CITIC Resources vs. Sherritt International | CITIC Resources vs. Metals X Limited | CITIC Resources vs. Interra Copper Corp | CITIC Resources vs. Anglo American PLC |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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