Correlation Between HP and Ares Acquisition

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

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

Diversification Opportunities for HP and Ares Acquisition

0.66

Correlation Coefficient

HP  Ares Acquisition

Poor diversification

The 3 months correlation between HP and Ares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Acquisition 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 Ares Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Acquisition has no effect on the direction of HP i.e., HP and Ares Acquisition go up and down completely randomly.

Pair Corralation between HP and Ares Acquisition

If you would invest  1,056  in Ares Acquisition on August 12, 2024 and sell it today you would earn a total of  0.00  from holding Ares Acquisition or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

HP Inc  vs.  Ares Acquisition

HP Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, HP may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Ares Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ares Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Ares Acquisition is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HP and Ares Acquisition

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

The idea behind HP Inc and Ares Acquisition 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.