Correlation Between HP and Gold

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Can any of the company-specific risk be diversified away by investing in both HP and Gold 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 Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Gold And Gemstone, you can compare the effects of market volatilities on HP and Gold 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 Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Gold.

Diversification Opportunities for HP and Gold

-0.68
  Correlation Coefficient
 HP

Excellent diversification

The 3 months correlation between HP and Gold is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Gold And Gemstone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold And Gemstone 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 Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold And Gemstone has no effect on the direction of HP i.e., HP and Gold go up and down completely randomly.

Pair Corralation between HP and Gold

Considering the 90-day investment horizon HP is expected to generate 5.87 times less return on investment than Gold. But when comparing it to its historical volatility, HP Inc is 6.74 times less risky than Gold. It trades about 0.07 of its potential returns per unit of risk. Gold And Gemstone is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.06  in Gold And Gemstone on August 25, 2024 and sell it today you would earn a total of  0.00  from holding Gold And Gemstone or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.57%
ValuesDaily Returns

HP Inc  vs.  Gold And Gemstone

 Performance 
       Timeline  
HP Inc 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, HP may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Gold And Gemstone 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Gold And Gemstone has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

HP and Gold Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and Gold

The main advantage of trading using opposite HP and Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Gold 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 Gold will offset losses from the drop in Gold's long position.
The idea behind HP Inc and Gold And Gemstone 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.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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