Correlation Between HP and Modern Mobility
Can any of the company-specific risk be diversified away by investing in both HP and Modern Mobility 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 Modern Mobility into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Modern Mobility Aids, you can compare the effects of market volatilities on HP and Modern Mobility 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 Modern Mobility. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Modern Mobility.
Diversification Opportunities for HP and Modern Mobility
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HP and Modern is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Modern Mobility Aids in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modern Mobility Aids 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 Modern Mobility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modern Mobility Aids has no effect on the direction of HP i.e., HP and Modern Mobility go up and down completely randomly.
Pair Corralation between HP and Modern Mobility
Considering the 90-day investment horizon HP is expected to generate 120.12 times less return on investment than Modern Mobility. But when comparing it to its historical volatility, HP Inc is 17.85 times less risky than Modern Mobility. It trades about 0.02 of its potential returns per unit of risk. Modern Mobility Aids is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 0.60 in Modern Mobility Aids on August 31, 2024 and sell it today you would lose (0.20) from holding Modern Mobility Aids or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
HP Inc vs. Modern Mobility Aids
Performance |
| Timeline |
| HP Inc |
| Modern Mobility Aids |
HP and Modern Mobility Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Modern Mobility
The main advantage of trading using opposite HP and Modern Mobility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Modern Mobility 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 Modern Mobility will offset losses from the drop in Modern Mobility's long position.| HP vs. RLJ Lodging Trust | HP vs. Aquagold International | HP vs. Stepstone Group | HP vs. Morningstar Unconstrained Allocation |
| Modern Mobility vs. Brainsway | Modern Mobility vs. Venus Concept | Modern Mobility vs. Tactile Systems Technology | Modern Mobility vs. Icecure Medical |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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