Correlation Between Hewlett Packard and Aluminumof China

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

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

Diversification Opportunities for Hewlett Packard and Aluminumof China

-0.35

Correlation Coefficient

Hewlett Packard  Aluminumof China

Very good diversification

The 3 months correlation between Hewlett and Aluminumof is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminumof China and Hewlett Packard 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 Hewlett Packard Enterprise are associated (or correlated) with Aluminumof China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminumof China has no effect on the direction of Hewlett Packard i.e., Hewlett Packard and Aluminumof China go up and down completely randomly.

Pair Corralation between Hewlett Packard and Aluminumof China

Assuming the 90 days trading horizon Hewlett Packard Enterprise is expected to under-perform the Aluminumof China. But the stock apears to be less risky and, when comparing its historical volatility, Hewlett Packard Enterprise is 1.22 times less risky than Aluminumof China. The stock trades about -0.15 of its potential returns per unit of risk. The Aluminum of is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  56.00  in Aluminum of on December 21, 2024 and sell it today you would earn a total of  11.00  from holding Aluminum of or generate 19.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Hewlett Packard Enterprise  vs.  Aluminum of

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. In spite of weak performance in the last few months, the Stock's technical and fundamental 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.

Aluminumof China

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Aluminumof China reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hewlett Packard and Aluminumof China

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

The idea behind Hewlett Packard Enterprise and Aluminum of 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.