Correlation Between Applied Digital and HEWLETT

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

By analyzing existing cross correlation between Applied Digital and HEWLETT PACKARD ENTERPRISE, you can compare the effects of market volatilities on Applied Digital and HEWLETT 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 Applied Digital with a short position of HEWLETT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Digital and HEWLETT.

Diversification Opportunities for Applied Digital and HEWLETT

0.21

Correlation Coefficient

Applied Digital  HEWLETT

Modest diversification

The 3 months correlation between Applied and HEWLETT is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Applied Digital 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 Applied Digital 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 Applied Digital are associated (or correlated) with HEWLETT. 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 Applied Digital i.e., Applied Digital and HEWLETT go up and down completely randomly.

Pair Corralation between Applied Digital and HEWLETT

Given the investment horizon of 90 days Applied Digital is expected to under-perform the HEWLETT. In addition to that, Applied Digital is 26.59 times more volatile than HEWLETT PACKARD ENTERPRISE. It trades about -0.03 of its total potential returns per unit of risk. HEWLETT PACKARD ENTERPRISE is currently generating about -0.06 per unit of volatility. If you would invest  9,614  in HEWLETT PACKARD ENTERPRISE on December 3, 2024 and sell it today you would lose (97.00) from holding HEWLETT PACKARD ENTERPRISE or give up 1.01% of portfolio value over 90 days.

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

Applied Digital  vs.  HEWLETT PACKARD ENTERPRISE

Applied Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

HEWLETT PACKARD ENTE

Risk-Adjusted Performance

Very Weak

Over the last 90 days HEWLETT PACKARD ENTERPRISE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HEWLETT is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Applied Digital and HEWLETT

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

The idea behind Applied Digital 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..