Correlation Between HP and Scholar Rock
Can any of the company-specific risk be diversified away by investing in both HP and Scholar Rock 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 Scholar Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Scholar Rock Holding, you can compare the effects of market volatilities on HP and Scholar Rock 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 Scholar Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Scholar Rock.
Diversification Opportunities for HP and Scholar Rock
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HP and Scholar is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Scholar Rock Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scholar Rock Holding 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 Scholar Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scholar Rock Holding has no effect on the direction of HP i.e., HP and Scholar Rock go up and down completely randomly.
Pair Corralation between HP and Scholar Rock
Considering the 90-day investment horizon HP Inc is expected to under-perform the Scholar Rock. But the stock apears to be less risky and, when comparing its historical volatility, HP Inc is 2.13 times less risky than Scholar Rock. The stock trades about -0.11 of its potential returns per unit of risk. The Scholar Rock Holding is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,043 in Scholar Rock Holding on August 29, 2024 and sell it today you would earn a total of 663.00 from holding Scholar Rock Holding or generate 21.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. Scholar Rock Holding
Performance |
| Timeline |
| HP Inc |
| Scholar Rock Holding |
HP and Scholar Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Scholar Rock
The main advantage of trading using opposite HP and Scholar Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Scholar Rock 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 Scholar Rock will offset losses from the drop in Scholar Rock's long position.The idea behind HP Inc and Scholar Rock Holding 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.| Scholar Rock vs. Bright Minds Biosciences | Scholar Rock vs. HP Inc | Scholar Rock vs. Intel | Scholar Rock vs. Chevron Corp |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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