Correlation Between HP and L Catterton
Can any of the company-specific risk be diversified away by investing in both HP and L Catterton 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 L Catterton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and L Catterton Asia, you can compare the effects of market volatilities on HP and L Catterton 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 L Catterton. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and L Catterton.
Diversification Opportunities for HP and L Catterton
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HP and LCAA is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and L Catterton Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Catterton Asia 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 L Catterton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Catterton Asia has no effect on the direction of HP i.e., HP and L Catterton go up and down completely randomly.
Pair Corralation between HP and L Catterton
If you would invest 2,841 in HP Inc on September 1, 2024 and sell it today you would earn a total of 702.00 from holding HP Inc or generate 24.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.53% |
| Values | Daily Returns |
HP Inc vs. L Catterton Asia
Performance |
| Timeline |
| HP Inc |
| L Catterton Asia |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
HP and L Catterton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and L Catterton
The main advantage of trading using opposite HP and L Catterton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, L Catterton 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 L Catterton will offset losses from the drop in L Catterton's long position.The idea behind HP Inc and L Catterton Asia 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.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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