Correlation Between HP and Vanguard FTSE

Can any of the company-specific risk be diversified away by investing in both HP and Vanguard FTSE 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 Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HP Inc and Vanguard FTSE Emerging, you can compare the effects of market volatilities on HP and Vanguard FTSE 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 Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Vanguard FTSE.

Diversification Opportunities for HP and Vanguard FTSE

0.35

Correlation Coefficient

HP  Vanguard FTSE

Weak diversification

The 3 months correlation between HP and Vanguard is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Vanguard FTSE Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Emerging 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Emerging has no effect on the direction of HP i.e., HP and Vanguard FTSE go up and down completely randomly.

Pair Corralation between HP and Vanguard FTSE

Considering the 90-day investment horizon HP Inc is expected to under-perform the Vanguard FTSE. In addition to that, HP is 1.32 times more volatile than Vanguard FTSE Emerging. It trades about -0.14 of its total potential returns per unit of risk. Vanguard FTSE Emerging is currently generating about 0.14 per unit of volatility. If you would invest  4,238  in Vanguard FTSE Emerging on February 6, 2024 and sell it today you would earn a total of  125.00  from holding Vanguard FTSE Emerging or generate 2.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

HP Inc  vs.  Vanguard FTSE Emerging

HP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, HP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Vanguard FTSE Emerging

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Emerging are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with HP and Vanguard FTSE

The main advantage of trading using opposite HP and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Vanguard FTSE 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE's long position.

The idea behind HP Inc and Vanguard FTSE Emerging 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.