Correlation Between HP and Pacer Lunt

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

Diversification Opportunities for HP and Pacer Lunt

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between HP and Pacer is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Pacer Lunt MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Lunt MidCap 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 Pacer Lunt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Lunt MidCap has no effect on the direction of HP i.e., HP and Pacer Lunt go up and down completely randomly.

Pair Corralation between HP and Pacer Lunt

Considering the 90-day investment horizon HP is expected to generate 1.44 times less return on investment than Pacer Lunt. In addition to that, HP is 1.69 times more volatile than Pacer Lunt MidCap. It trades about 0.04 of its total potential returns per unit of risk. Pacer Lunt MidCap is currently generating about 0.09 per unit of volatility. If you would invest  3,212  in Pacer Lunt MidCap on August 31, 2024 and sell it today you would earn a total of  1,818  from holding Pacer Lunt MidCap or generate 56.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

HP Inc  vs.  Pacer Lunt MidCap

 Performance 
       Timeline  
HP Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, HP is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.
Pacer Lunt MidCap 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Lunt MidCap are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting primary indicators, Pacer Lunt may actually be approaching a critical reversion point that can send shares even higher in December 2024.

HP and Pacer Lunt Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and Pacer Lunt

The main advantage of trading using opposite HP and Pacer Lunt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Pacer Lunt 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 Pacer Lunt will offset losses from the drop in Pacer Lunt's long position.
The idea behind HP Inc and Pacer Lunt MidCap 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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