Correlation Between Hewlett Packard and International Business
Can any of the company-specific risk be diversified away by investing in both Hewlett Packard and International Business 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 International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hewlett Packard Enterprise and International Business Machines, you can compare the effects of market volatilities on Hewlett Packard and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hewlett Packard and International Business.
Diversification Opportunities for Hewlett Packard and International Business
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hewlett and International is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 Enterprise are associated (or correlated) with International Business. 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 Hewlett Packard i.e., Hewlett Packard and International Business go up and down completely randomly.
Pair Corralation between Hewlett Packard and International Business
Considering the 90-day investment horizon Hewlett Packard is expected to generate 1.97 times less return on investment than International Business. In addition to that, Hewlett Packard is 1.57 times more volatile than International Business Machines. It trades about 0.02 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.07 per unit of volatility. If you would invest 12,373 in International Business Machines on January 25, 2024 and sell it today you would earn a total of 5,846 from holding International Business Machines or generate 47.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hewlett Packard Enterprise vs. International Business Machine
Performance |
| Timeline |
| Hewlett Packard Ente |
| International Business |
Hewlett Packard and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hewlett Packard and International Business
The main advantage of trading using opposite Hewlett Packard and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard position performs unexpectedly, International Business 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 Business will offset losses from the drop in International Business' long position.| Hewlett Packard vs. LG Display Co | Hewlett Packard vs. Sony Corp | Hewlett Packard vs. Sonos Inc | Hewlett Packard vs. Vizio Holding Corp |
| International Business vs. FiscalNote Holdings | International Business vs. Innodata | International Business vs. Aurora Innovation | International Business vs. Conduent |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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