Correlation Between Hewlett Packard and Onto Innovation

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

Diversification Opportunities for Hewlett Packard and Onto Innovation

-0.58

Correlation Coefficient

Hewlett Packard  Onto Innovation

Excellent diversification

The 3 months correlation between Hewlett and Onto is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and Onto Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onto Innovation 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 Onto Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onto Innovation has no effect on the direction of Hewlett Packard i.e., Hewlett Packard and Onto Innovation go up and down completely randomly.

Pair Corralation between Hewlett Packard and Onto Innovation

Considering the 90-day investment horizon Hewlett Packard Enterprise is expected to generate 0.98 times more return on investment than Onto Innovation. However, Hewlett Packard Enterprise is 1.02 times less risky than Onto Innovation. It trades about 0.08 of its potential returns per unit of risk. Onto Innovation is currently generating about -0.16 per unit of risk. If you would invest  1,997  in Hewlett Packard Enterprise on September 20, 2024 and sell it today you would earn a total of  157.00  from holding Hewlett Packard Enterprise or generate 7.86% return on investment over 90 days.

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

Hewlett Packard Enterprise  vs.  Onto Innovation

Hewlett Packard Ente

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Hewlett Packard exhibited solid returns over the last few months and may actually be approaching a breakup point.

Onto Innovation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Onto Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Hewlett Packard and Onto Innovation

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

The idea behind Hewlett Packard Enterprise and Onto Innovation 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.