Correlation Between Hewlett Packard and Applied Opt

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

Diversification Opportunities for Hewlett Packard and Applied Opt

0.8

Correlation Coefficient

Hewlett Packard  Applied Opt

Very poor diversification

The 3 months correlation between Hewlett and Applied is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and Applied Opt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Opt 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 Applied Opt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Opt has no effect on the direction of Hewlett Packard i.e., Hewlett Packard and Applied Opt go up and down completely randomly.

Pair Corralation between Hewlett Packard and Applied Opt

Considering the 90-day investment horizon Hewlett Packard Enterprise is expected to generate 0.31 times more return on investment than Applied Opt. However, Hewlett Packard Enterprise is 3.22 times less risky than Applied Opt. It trades about -0.16 of its potential returns per unit of risk. Applied Opt is currently generating about -0.1 per unit of risk. If you would invest  2,123  in Hewlett Packard Enterprise on December 29, 2024 and sell it today you would lose (544.00) from holding Hewlett Packard Enterprise or give up 25.62% of portfolio value over 90 days.

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

Hewlett Packard Enterprise  vs.  Applied Opt

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 conflicting performance in the last few months, the Stock's basic 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.

Applied Opt

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Opt has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Hewlett Packard and Applied Opt

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

The idea behind Hewlett Packard Enterprise and Applied Opt 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.