Correlation Between HP and INTERNATIONAL

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

Diversification Opportunities for HP and INTERNATIONAL

-0.6
  Correlation Coefficient
 HP

Excellent diversification

The 3 months correlation between HP and INTERNATIONAL is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and INTERNATIONAL BUSINESS MACHS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERNATIONAL BUSINESS 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 INTERNATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERNATIONAL BUSINESS has no effect on the direction of HP i.e., HP and INTERNATIONAL go up and down completely randomly.

Pair Corralation between HP and INTERNATIONAL

Considering the 90-day investment horizon HP Inc is expected to generate 3.19 times more return on investment than INTERNATIONAL. However, HP is 3.19 times more volatile than INTERNATIONAL BUSINESS MACHS. It trades about 0.13 of its potential returns per unit of risk. INTERNATIONAL BUSINESS MACHS is currently generating about 0.1 per unit of risk. If you would invest  3,742  in HP Inc on August 29, 2024 and sell it today you would earn a total of  168.00  from holding HP Inc or generate 4.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

HP Inc  vs.  INTERNATIONAL BUSINESS MACHS

 Performance 
       Timeline  
HP Inc 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, HP may actually be approaching a critical reversion point that can send shares even higher in December 2024.
INTERNATIONAL BUSINESS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days INTERNATIONAL BUSINESS MACHS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, INTERNATIONAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

HP and INTERNATIONAL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and INTERNATIONAL

The main advantage of trading using opposite HP and INTERNATIONAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, INTERNATIONAL 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 INTERNATIONAL will offset losses from the drop in INTERNATIONAL's long position.
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The idea behind HP Inc and INTERNATIONAL BUSINESS MACHS 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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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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