Correlation Between HP and IShares Financial
Can any of the company-specific risk be diversified away by investing in both HP and IShares Financial 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 IShares Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and iShares Financial Services, you can compare the effects of market volatilities on HP and IShares Financial 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 IShares Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and IShares Financial.
Diversification Opportunities for HP and IShares Financial
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HP and IShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and iShares Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financial 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 IShares Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financial has no effect on the direction of HP i.e., HP and IShares Financial go up and down completely randomly.
Pair Corralation between HP and IShares Financial
Considering the 90-day investment horizon HP is expected to generate 1.37 times less return on investment than IShares Financial. In addition to that, HP is 1.82 times more volatile than iShares Financial Services. It trades about 0.06 of its total potential returns per unit of risk. iShares Financial Services is currently generating about 0.14 per unit of volatility. If you would invest 4,981 in iShares Financial Services on August 27, 2024 and sell it today you would earn a total of 3,165 from holding iShares Financial Services or generate 63.54% 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. iShares Financial Services
Performance |
| Timeline |
| HP Inc |
| iShares Financial |
HP and IShares Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and IShares Financial
The main advantage of trading using opposite HP and IShares Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, IShares Financial 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 IShares Financial will offset losses from the drop in IShares Financial's long position.The idea behind HP Inc and iShares Financial Services 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.| IShares Financial vs. iShares Financials ETF | IShares Financial vs. iShares Consumer Discretionary | IShares Financial vs. iShares Industrials ETF | IShares Financial vs. iShares Consumer Staples |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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