Correlation Between HP and Ethema Health
Can any of the company-specific risk be diversified away by investing in both HP and Ethema Health 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 Ethema Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Ethema Health Corp, you can compare the effects of market volatilities on HP and Ethema Health 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 Ethema Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Ethema Health.
Diversification Opportunities for HP and Ethema Health
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between HP and Ethema is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Ethema Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethema Health Corp 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 Ethema Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethema Health Corp has no effect on the direction of HP i.e., HP and Ethema Health go up and down completely randomly.
Pair Corralation between HP and Ethema Health
Considering the 90-day investment horizon HP is expected to generate 16.7 times less return on investment than Ethema Health. But when comparing it to its historical volatility, HP Inc is 8.76 times less risky than Ethema Health. It trades about 0.04 of its potential returns per unit of risk. Ethema Health Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.04 in Ethema Health Corp on August 30, 2024 and sell it today you would earn a total of 0.00 from holding Ethema Health Corp or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. Ethema Health Corp
Performance |
| Timeline |
| HP Inc |
| Ethema Health Corp |
HP and Ethema Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Ethema Health
The main advantage of trading using opposite HP and Ethema Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Ethema Health 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 Ethema Health will offset losses from the drop in Ethema Health's long position.The idea behind HP Inc and Ethema Health Corp 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.| Ethema Health vs. PayPal Holdings | Ethema Health vs. Nasdaq Inc | Ethema Health vs. Choice Hotels International | Ethema Health vs. Microsoft |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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