Correlation Between Apple and Hewlett Packard

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

By analyzing existing cross correlation between Apple Inc and Hewlett Packard Enterprise, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Hewlett Packard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Hewlett Packard.

Diversification Opportunities for Apple and Hewlett Packard

0.34

Correlation Coefficient

Apple  Hewlett Packard

Weak diversification

The 3 months correlation between Apple and Hewlett is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and Hewlett Packard go up and down completely randomly.

Pair Corralation between Apple and Hewlett Packard

Given the investment horizon of 90 days Apple is expected to generate 1.92 times less return on investment than Hewlett Packard. But when comparing it to its historical volatility, Apple Inc is 1.6 times less risky than Hewlett Packard. It trades about 0.12 of its potential returns per unit of risk. Hewlett Packard Enterprise is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,127  in Hewlett Packard Enterprise on September 24, 2024 and sell it today you would earn a total of  1,094  from holding Hewlett Packard Enterprise or generate 21.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	57.48%
Values	Daily Returns

Apple Inc  vs.  Hewlett Packard Enterprise

Apple Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hewlett Packard Ente

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Hewlett Packard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apple and Hewlett Packard

The main advantage of trading using opposite Apple and Hewlett Packard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.

The idea behind Apple Inc and Hewlett Packard Enterprise 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.