Correlation Between HP and Red Electrica
Can any of the company-specific risk be diversified away by investing in both HP and Red Electrica 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 Red Electrica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Red Electrica Corporacion, you can compare the effects of market volatilities on HP and Red Electrica 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 Red Electrica. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Red Electrica.
Diversification Opportunities for HP and Red Electrica
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HP and Red is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Red Electrica Corporacion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Electrica Corporacion 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 Red Electrica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Electrica Corporacion has no effect on the direction of HP i.e., HP and Red Electrica go up and down completely randomly.
Pair Corralation between HP and Red Electrica
Considering the 90-day investment horizon HP Inc is expected to generate 1.54 times more return on investment than Red Electrica. However, HP is 1.54 times more volatile than Red Electrica Corporacion. It trades about 0.04 of its potential returns per unit of risk. Red Electrica Corporacion is currently generating about 0.04 per unit of risk. If you would invest 2,853 in HP Inc on August 31, 2024 and sell it today you would earn a total of 690.00 from holding HP Inc or generate 24.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. Red Electrica Corporacion
Performance |
| Timeline |
| HP Inc |
| Red Electrica Corporacion |
HP and Red Electrica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Red Electrica
The main advantage of trading using opposite HP and Red Electrica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Red Electrica 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 Red Electrica will offset losses from the drop in Red Electrica's long position.| HP vs. RLJ Lodging Trust | HP vs. Aquagold International | HP vs. Stepstone Group | HP vs. Morningstar Unconstrained Allocation |
| Red Electrica vs. Southern Company | Red Electrica vs. Duke Energy | Red Electrica vs. Duke Energy | Red Electrica vs. National Grid PLC |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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