Correlation Between Hewlett Packard and Iridium Communications

Can any of the company-specific risk be diversified away by investing in both Hewlett Packard and Iridium Communications 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 Iridium Communications 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 Iridium Communications, you can compare the effects of market volatilities on Hewlett Packard and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hewlett Packard and Iridium Communications.

Diversification Opportunities for Hewlett Packard and Iridium Communications

0.17

Correlation Coefficient

Hewlett Packard  Iridium Communications

Average diversification

The 3 months correlation between Hewlett and Iridium is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Hewlett Packard i.e., Hewlett Packard and Iridium Communications go up and down completely randomly.

Pair Corralation between Hewlett Packard and Iridium Communications

Assuming the 90 days trading horizon Hewlett Packard Enterprise is expected to generate 0.83 times more return on investment than Iridium Communications. However, Hewlett Packard Enterprise is 1.21 times less risky than Iridium Communications. It trades about 0.14 of its potential returns per unit of risk. Iridium Communications is currently generating about -0.02 per unit of risk. If you would invest  5,127  in Hewlett Packard Enterprise on October 9, 2024 and sell it today you would earn a total of  1,277  from holding Hewlett Packard Enterprise or generate 24.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	33.2%
Values	Daily Returns

Hewlett Packard Enterprise  vs.  Iridium Communications

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Iridium Communications

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Iridium Communications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Iridium Communications is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hewlett Packard and Iridium Communications

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

The idea behind Hewlett Packard Enterprise and Iridium Communications 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.