Correlation Between Hewlett Packard and Sphere Entertainment

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

Diversification Opportunities for Hewlett Packard and Sphere Entertainment

-0.38

Correlation Coefficient

Hewlett Packard  Sphere Entertainment

Very good diversification

The 3 months correlation between Hewlett and Sphere is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Hewlett Packard i.e., Hewlett Packard and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Hewlett Packard and Sphere Entertainment

Assuming the 90 days trading horizon Hewlett Packard Enterprise is expected to generate 0.94 times more return on investment than Sphere Entertainment. However, Hewlett Packard Enterprise is 1.07 times less risky than Sphere Entertainment. It trades about 0.32 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about 0.25 per unit of risk. If you would invest  6,316  in Hewlett Packard Enterprise on October 25, 2024 and sell it today you would earn a total of  621.00  from holding Hewlett Packard Enterprise or generate 9.83% return on investment over 90 days.

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

Hewlett Packard Enterprise  vs.  Sphere Entertainment Co

Hewlett Packard Ente

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Hewlett Packard exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Hewlett Packard and Sphere Entertainment

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

The idea behind Hewlett Packard Enterprise and Sphere Entertainment Co 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.