Correlation Between GP Investments and Huntington Ingalls

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

By analyzing existing cross correlation between GP Investments and Huntington Ingalls Industries,, you can compare the effects of market volatilities on GP Investments and Huntington Ingalls 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 GP Investments with a short position of Huntington Ingalls. Check out your portfolio center. Please also check ongoing floating volatility patterns of GP Investments and Huntington Ingalls.

Diversification Opportunities for GP Investments and Huntington Ingalls

0.05

Correlation Coefficient

GP Investments  Huntington Ingalls

Significant diversification

The 3 months correlation between GPIV33 and Huntington is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding GP Investments and Huntington Ingalls Industries, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Ingalls and GP Investments 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 GP Investments are associated (or correlated) with Huntington Ingalls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntington Ingalls has no effect on the direction of GP Investments i.e., GP Investments and Huntington Ingalls go up and down completely randomly.

Pair Corralation between GP Investments and Huntington Ingalls

Assuming the 90 days trading horizon GP Investments is expected to generate 2.61 times less return on investment than Huntington Ingalls. But when comparing it to its historical volatility, GP Investments is 1.06 times less risky than Huntington Ingalls. It trades about 0.0 of its potential returns per unit of risk. Huntington Ingalls Industries, is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,541  in Huntington Ingalls Industries, on December 26, 2024 and sell it today you would lose (39.00) from holding Huntington Ingalls Industries, or give up 2.53% of portfolio value over 90 days.

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

GP Investments  vs.  Huntington Ingalls Industries,

GP Investments

Risk-Adjusted Performance

Very Weak

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

Huntington Ingalls

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GP Investments and Huntington Ingalls

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

The idea behind GP Investments and Huntington Ingalls Industries, 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 Transaction History module to view history of all your transactions and understand their impact on performance.