Correlation Between HP and Laramide Resources

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Can any of the company-specific risk be diversified away by investing in both HP and Laramide Resources 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 Laramide Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Laramide Resources, you can compare the effects of market volatilities on HP and Laramide Resources 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 Laramide Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Laramide Resources.

Diversification Opportunities for HP and Laramide Resources

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between HP and Laramide is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Laramide Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laramide Resources 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 Laramide Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laramide Resources has no effect on the direction of HP i.e., HP and Laramide Resources go up and down completely randomly.

Pair Corralation between HP and Laramide Resources

Considering the 90-day investment horizon HP is expected to generate 1.99 times less return on investment than Laramide Resources. But when comparing it to its historical volatility, HP Inc is 2.34 times less risky than Laramide Resources. It trades about 0.05 of its potential returns per unit of risk. Laramide Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Laramide Resources on August 25, 2024 and sell it today you would earn a total of  18.00  from holding Laramide Resources or generate 50.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.8%
ValuesDaily Returns

HP Inc  vs.  Laramide Resources

 Performance 
       Timeline  
HP Inc 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, HP may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Laramide Resources 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Laramide Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Laramide Resources reported solid returns over the last few months and may actually be approaching a breakup point.

HP and Laramide Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and Laramide Resources

The main advantage of trading using opposite HP and Laramide Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Laramide Resources 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 Laramide Resources will offset losses from the drop in Laramide Resources' long position.
The idea behind HP Inc and Laramide Resources 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.
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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