Correlation Between Hewlett Packard and Lowes Companies
Can any of the company-specific risk be diversified away by investing in both Hewlett Packard and Lowes Companies 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 Hewlett Packard and Lowes Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hewlett Packard Co and Lowes Companies, you can compare the effects of market volatilities on Hewlett Packard and Lowes Companies 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 Hewlett Packard with a short position of Lowes Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hewlett Packard and Lowes Companies.
Diversification Opportunities for Hewlett Packard and Lowes Companies
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hewlett and Lowes is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Co and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies and Hewlett Packard 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 Hewlett Packard Co are associated (or correlated) with Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of Hewlett Packard i.e., Hewlett Packard and Lowes Companies go up and down completely randomly.
Pair Corralation between Hewlett Packard and Lowes Companies
Assuming the 90 days trading horizon Hewlett Packard is expected to generate 2.48 times less return on investment than Lowes Companies. In addition to that, Hewlett Packard is 1.18 times more volatile than Lowes Companies. It trades about 0.05 of its total potential returns per unit of risk. Lowes Companies is currently generating about 0.15 per unit of volatility. If you would invest 7,584 in Lowes Companies on August 30, 2024 and sell it today you would earn a total of 368.00 from holding Lowes Companies or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hewlett Packard Co vs. Lowes Companies
Performance |
| Timeline |
| Hewlett Packard |
| Lowes Companies |
Hewlett Packard and Lowes Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hewlett Packard and Lowes Companies
The main advantage of trading using opposite Hewlett Packard and Lowes Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard position performs unexpectedly, Lowes Companies 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 Lowes Companies will offset losses from the drop in Lowes Companies' long position.| Hewlett Packard vs. Capital One Financial | Hewlett Packard vs. GP Investments | Hewlett Packard vs. Deutsche Bank Aktiengesellschaft | Hewlett Packard vs. Bank of America |
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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