Correlation Between HP and Northern Lights
Can any of the company-specific risk be diversified away by investing in both HP and Northern Lights 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 Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Northern Lights, you can compare the effects of market volatilities on HP and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Northern Lights.
Diversification Opportunities for HP and Northern Lights
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HP and Northern is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of HP i.e., HP and Northern Lights go up and down completely randomly.
Pair Corralation between HP and Northern Lights
Considering the 90-day investment horizon HP Inc is expected to under-perform the Northern Lights. In addition to that, HP is 6.87 times more volatile than Northern Lights. It trades about -0.09 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.07 per unit of volatility. If you would invest 2,362 in Northern Lights on August 30, 2024 and sell it today you would earn a total of 15.00 from holding Northern Lights or generate 0.64% 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. Northern Lights
Performance |
| Timeline |
| HP Inc |
| Northern Lights |
HP and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Northern Lights
The main advantage of trading using opposite HP and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.The idea behind HP Inc and Northern Lights 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.| Northern Lights vs. Inspire SmallMid Cap | Northern Lights vs. Inspire Global Hope | Northern Lights vs. Northern Lights | Northern Lights vs. Inspire International ESG |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |