Correlation Between HP and Mountain Crest
Can any of the company-specific risk be diversified away by investing in both HP and Mountain Crest 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 Mountain Crest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Mountain Crest Acquisition, you can compare the effects of market volatilities on HP and Mountain Crest 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 Mountain Crest. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Mountain Crest.
Diversification Opportunities for HP and Mountain Crest
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HP and Mountain is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Mountain Crest Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Crest Acqui 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 Mountain Crest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Crest Acqui has no effect on the direction of HP i.e., HP and Mountain Crest go up and down completely randomly.
Pair Corralation between HP and Mountain Crest
If you would invest 3,552 in HP Inc on September 1, 2024 and sell it today you would lose (9.00) from holding HP Inc or give up 0.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
HP Inc vs. Mountain Crest Acquisition
Performance |
| Timeline |
| HP Inc |
| Mountain Crest Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
HP and Mountain Crest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Mountain Crest
The main advantage of trading using opposite HP and Mountain Crest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Mountain Crest 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 Mountain Crest will offset losses from the drop in Mountain Crest's long position.The idea behind HP Inc and Mountain Crest Acquisition 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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