Correlation Between HP and Granite Falls
Can any of the company-specific risk be diversified away by investing in both HP and Granite Falls 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 Granite Falls into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Granite Falls Energy, you can compare the effects of market volatilities on HP and Granite Falls 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 Granite Falls. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Granite Falls.
Diversification Opportunities for HP and Granite Falls
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HP and Granite is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Granite Falls Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Falls Energy 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 Granite Falls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Falls Energy has no effect on the direction of HP i.e., HP and Granite Falls go up and down completely randomly.
Pair Corralation between HP and Granite Falls
Considering the 90-day investment horizon HP Inc is expected to generate 1.49 times more return on investment than Granite Falls. However, HP is 1.49 times more volatile than Granite Falls Energy. It trades about 0.02 of its potential returns per unit of risk. Granite Falls Energy is currently generating about -0.06 per unit of risk. If you would invest 3,476 in HP Inc on September 1, 2024 and sell it today you would earn a total of 67.00 from holding HP Inc or generate 1.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
HP Inc vs. Granite Falls Energy
Performance |
| Timeline |
| HP Inc |
| Granite Falls Energy |
HP and Granite Falls Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Granite Falls
The main advantage of trading using opposite HP and Granite Falls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Granite Falls 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 Granite Falls will offset losses from the drop in Granite Falls' long position.The idea behind HP Inc and Granite Falls Energy 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.| Granite Falls vs. European Wax Center | Granite Falls vs. Lincoln Electric Holdings | Granite Falls vs. Ardelyx | Granite Falls vs. Mink Therapeutics |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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