Correlation Between International Business and Hewlett Packard
Can any of the company-specific risk be diversified away by investing in both International Business and Hewlett Packard 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 International Business and Hewlett Packard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and Hewlett Packard Enterprise, you can compare the effects of market volatilities on International Business and Hewlett Packard 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 International Business with a short position of Hewlett Packard. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Hewlett Packard.
Diversification Opportunities for International Business and Hewlett Packard
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Hewlett is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Hewlett Packard Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hewlett Packard Ente and International Business 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 International Business Machines are associated (or correlated) with Hewlett Packard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hewlett Packard Ente has no effect on the direction of International Business i.e., International Business and Hewlett Packard go up and down completely randomly.
Pair Corralation between International Business and Hewlett Packard
Considering the 90-day investment horizon International Business Machines is expected to generate 0.63 times more return on investment than Hewlett Packard. However, International Business Machines is 1.59 times less risky than Hewlett Packard. It trades about 0.13 of its potential returns per unit of risk. Hewlett Packard Enterprise is currently generating about 0.01 per unit of risk. If you would invest 13,517 in International Business Machines on January 20, 2024 and sell it today you would earn a total of 4,630 from holding International Business Machines or generate 34.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.47% |
| Values | Daily Returns |
International Business Machine vs. Hewlett Packard Enterprise
Performance |
| Timeline |
| International Business |
| Hewlett Packard Ente |
International Business and Hewlett Packard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and Hewlett Packard
The main advantage of trading using opposite International Business and Hewlett Packard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business position performs unexpectedly, Hewlett Packard 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 Hewlett Packard will offset losses from the drop in Hewlett Packard's long position.| International Business vs. Information Services Group | International Business vs. Home Bancorp | International Business vs. CRA International | International Business vs. Aquagold International |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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