Correlation Between HP and IShares Consumer
Can any of the company-specific risk be diversified away by investing in both HP and IShares Consumer 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 Consumer 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 Consumer Staples, you can compare the effects of market volatilities on HP and IShares Consumer 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 Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and IShares Consumer.
Diversification Opportunities for HP and IShares Consumer
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HP and IShares is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and iShares Consumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Consumer Staples 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 Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Consumer Staples has no effect on the direction of HP i.e., HP and IShares Consumer go up and down completely randomly.
Pair Corralation between HP and IShares Consumer
Considering the 90-day investment horizon HP Inc is expected to generate 2.67 times more return on investment than IShares Consumer. However, HP is 2.67 times more volatile than iShares Consumer Staples. It trades about 0.17 of its potential returns per unit of risk. iShares Consumer Staples is currently generating about -0.02 per unit of risk. If you would invest 3,585 in HP Inc on August 24, 2024 and sell it today you would earn a total of 206.00 from holding HP Inc or generate 5.75% 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. iShares Consumer Staples
Performance |
| Timeline |
| HP Inc |
| iShares Consumer Staples |
HP and IShares Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and IShares Consumer
The main advantage of trading using opposite HP and IShares Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, IShares Consumer 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 Consumer will offset losses from the drop in IShares Consumer's long position.The idea behind HP Inc and iShares Consumer Staples 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 Consumer vs. iShares Consumer Discretionary | IShares Consumer vs. iShares Industrials ETF | IShares Consumer vs. iShares Utilities ETF | IShares Consumer vs. iShares Basic Materials |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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