Correlation Between HP and REX FANG
Can any of the company-specific risk be diversified away by investing in both HP and REX FANG 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 REX FANG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and REX FANG Innovation, you can compare the effects of market volatilities on HP and REX FANG 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 REX FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and REX FANG.
Diversification Opportunities for HP and REX FANG
Very poor diversification
The 3 months correlation between HP and REX is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and REX FANG Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX FANG Innovation 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 REX FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX FANG Innovation has no effect on the direction of HP i.e., HP and REX FANG go up and down completely randomly.
Pair Corralation between HP and REX FANG
Considering the 90-day investment horizon HP is expected to generate 2.14 times less return on investment than REX FANG. In addition to that, HP is 1.75 times more volatile than REX FANG Innovation. It trades about 0.02 of its total potential returns per unit of risk. REX FANG Innovation is currently generating about 0.07 per unit of volatility. If you would invest 4,708 in REX FANG Innovation on September 1, 2024 and sell it today you would earn a total of 412.00 from holding REX FANG Innovation or generate 8.75% 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. REX FANG Innovation
Performance |
| Timeline |
| HP Inc |
| REX FANG Innovation |
HP and REX FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and REX FANG
The main advantage of trading using opposite HP and REX FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, REX FANG 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 REX FANG will offset losses from the drop in REX FANG's long position.The idea behind HP Inc and REX FANG Innovation 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.| REX FANG vs. Freedom Day Dividend | REX FANG vs. iShares MSCI China | REX FANG vs. iShares Dividend and | REX FANG 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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