Correlation Between Hewlett Packard and Major Drilling

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

Diversification Opportunities for Hewlett Packard and Major Drilling

-0.05

Correlation Coefficient

Hewlett Packard  Major Drilling

Good diversification

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

Pair Corralation between Hewlett Packard and Major Drilling

Assuming the 90 days trading horizon Hewlett Packard Enterprise is expected to generate 1.57 times more return on investment than Major Drilling. However, Hewlett Packard is 1.57 times more volatile than Major Drilling Group. It trades about -0.06 of its potential returns per unit of risk. Major Drilling Group is currently generating about -0.25 per unit of risk. If you would invest  6,585  in Hewlett Packard Enterprise on October 10, 2024 and sell it today you would lose (181.00) from holding Hewlett Packard Enterprise or give up 2.75% of portfolio value over 90 days.

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

Hewlett Packard Enterprise  vs.  Major Drilling Group

Hewlett Packard Ente

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Hewlett Packard may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Major Drilling Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Major Drilling Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Major Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hewlett Packard and Major Drilling

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

The idea behind Hewlett Packard Enterprise and Major Drilling Group 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.