Correlation Between HP and Vodafone Group
Can any of the company-specific risk be diversified away by investing in both HP and Vodafone Group 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 Vodafone Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Vodafone Group PLC, you can compare the effects of market volatilities on HP and Vodafone Group 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 Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Vodafone Group.
Diversification Opportunities for HP and Vodafone Group
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HP and Vodafone is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group PLC 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of HP i.e., HP and Vodafone Group go up and down completely randomly.
Pair Corralation between HP and Vodafone Group
Considering the 90-day investment horizon HP Inc is expected to generate 0.68 times more return on investment than Vodafone Group. However, HP Inc is 1.47 times less risky than Vodafone Group. It trades about 0.13 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about -0.23 per unit of risk. If you would invest 3,647 in HP Inc on August 25, 2024 and sell it today you would earn a total of 166.00 from holding HP Inc or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
HP Inc vs. Vodafone Group PLC
Performance |
| Timeline |
| HP Inc |
| Vodafone Group PLC |
HP and Vodafone Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Vodafone Group
The main advantage of trading using opposite HP and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Vodafone Group 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 Vodafone Group will offset losses from the drop in Vodafone Group's long position.The idea behind HP Inc and Vodafone Group PLC 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.| Vodafone Group vs. KDDI Corp | Vodafone Group vs. Amrica Mvil, SAB | Vodafone Group vs. Airtel Africa Plc | Vodafone Group vs. BCE Inc |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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