Correlation Between HP and Metro
Can any of the company-specific risk be diversified away by investing in both HP and Metro 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 Metro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Metro Inc, you can compare the effects of market volatilities on HP and Metro 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 Metro. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Metro.
Diversification Opportunities for HP and Metro
Very good diversification
The 3 months correlation between HP and Metro is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Metro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Inc 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 Metro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Inc has no effect on the direction of HP i.e., HP and Metro go up and down completely randomly.
Pair Corralation between HP and Metro
Considering the 90-day investment horizon HP Inc is expected to under-perform the Metro. In addition to that, HP is 2.96 times more volatile than Metro Inc. It trades about -0.02 of its total potential returns per unit of risk. Metro Inc is currently generating about 0.42 per unit of volatility. If you would invest 5,948 in Metro Inc on September 2, 2024 and sell it today you would earn a total of 543.00 from holding Metro Inc or generate 9.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. Metro Inc
Performance |
| Timeline |
| HP Inc |
| Metro Inc |
HP and Metro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Metro
The main advantage of trading using opposite HP and Metro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Metro 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 Metro will offset losses from the drop in Metro's long position.The idea behind HP Inc and Metro Inc 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.| Metro vs. Natural Grocers by | Metro vs. Sprouts Farmers Market | Metro vs. Albertsons Companies | Metro vs. Kroger Company |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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