Correlation Between Blue Lagoon and Hewlett Packard

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

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

Diversification Opportunities for Blue Lagoon and Hewlett Packard

0.07

Correlation Coefficient

Blue Lagoon  Hewlett Packard

Significant diversification

The 3 months correlation between Blue and Hewlett is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Blue Lagoon Resources 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 Blue Lagoon 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 Blue Lagoon Resources 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 Blue Lagoon i.e., Blue Lagoon and Hewlett Packard go up and down completely randomly.

Pair Corralation between Blue Lagoon and Hewlett Packard

Assuming the 90 days horizon Blue Lagoon Resources is expected to generate 4.1 times more return on investment than Hewlett Packard. However, Blue Lagoon is 4.1 times more volatile than Hewlett Packard Enterprise. It trades about 0.04 of its potential returns per unit of risk. Hewlett Packard Enterprise is currently generating about 0.04 per unit of risk. If you would invest  9.00  in Blue Lagoon Resources on October 11, 2024 and sell it today you would lose (0.02) from holding Blue Lagoon Resources or give up 0.22% of portfolio value over 90 days.

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

Blue Lagoon Resources  vs.  Hewlett Packard Enterprise

Blue Lagoon Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Lagoon Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Blue Lagoon reported solid returns over the last few months and may actually be approaching a breakup point.

Hewlett Packard Ente

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Hewlett Packard is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Blue Lagoon and Hewlett Packard

The main advantage of trading using opposite Blue Lagoon and Hewlett Packard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Lagoon 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 Blue Lagoon Resources 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.