Correlation Between Hewlett Packard and Aehr Test

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

Diversification Opportunities for Hewlett Packard and Aehr Test

-0.38

Correlation Coefficient

Hewlett Packard  Aehr Test

Very good diversification

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

Pair Corralation between Hewlett Packard and Aehr Test

Considering the 90-day investment horizon Hewlett Packard Enterprise is expected to under-perform the Aehr Test. But the stock apears to be less risky and, when comparing its historical volatility, Hewlett Packard Enterprise is 2.04 times less risky than Aehr Test. The stock trades about 0.0 of its potential returns per unit of risk. The Aehr Test Systems is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,127  in Aehr Test Systems on September 21, 2024 and sell it today you would earn a total of  205.00  from holding Aehr Test Systems or generate 18.19% 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.  Aehr Test Systems

Hewlett Packard Ente

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Hewlett Packard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aehr Test Systems

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aehr Test Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Aehr Test reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hewlett Packard and Aehr Test

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

The idea behind Hewlett Packard Enterprise and Aehr Test Systems 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.