Correlation Between HP and InTest
Can any of the company-specific risk be diversified away by investing in both HP and InTest 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 InTest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and inTest, you can compare the effects of market volatilities on HP and InTest 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 InTest. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and InTest.
Diversification Opportunities for HP and InTest
Poor diversification
The 3 months correlation between HP and InTest is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and inTest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on inTest 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 InTest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of inTest has no effect on the direction of HP i.e., HP and InTest go up and down completely randomly.
Pair Corralation between HP and InTest
Considering the 90-day investment horizon HP is expected to generate 3.04 times less return on investment than InTest. But when comparing it to its historical volatility, HP Inc is 2.31 times less risky than InTest. It trades about 0.06 of its potential returns per unit of risk. inTest is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 738.00 in inTest on August 27, 2024 and sell it today you would earn a total of 39.00 from holding inTest or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. inTest
Performance |
| Timeline |
| HP Inc |
| inTest |
HP and InTest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and InTest
The main advantage of trading using opposite HP and InTest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, InTest 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 InTest will offset losses from the drop in InTest's long position.The idea behind HP Inc and inTest 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.| InTest vs. Axcelis Technologies | InTest vs. Lam Research Corp | InTest vs. Photronics | InTest vs. indie Semiconductor |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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