Correlation Between HPQ Silicon and CVS HEALTH

Can any of the company-specific risk be diversified away by investing in both HPQ Silicon and CVS HEALTH 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 HPQ Silicon and CVS HEALTH into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HPQ Silicon Resources and CVS HEALTH CDR, you can compare the effects of market volatilities on HPQ Silicon and CVS HEALTH 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 HPQ Silicon with a short position of CVS HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of HPQ Silicon and CVS HEALTH.

Diversification Opportunities for HPQ Silicon and CVS HEALTH

0.59

Correlation Coefficient

HPQ Silicon  CVS HEALTH

Very weak diversification

The 3 months correlation between HPQ and CVS is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding HPQ Silicon Resources and CVS HEALTH CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH CDR and HPQ Silicon 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 HPQ Silicon Resources are associated (or correlated) with CVS HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS HEALTH CDR has no effect on the direction of HPQ Silicon i.e., HPQ Silicon and CVS HEALTH go up and down completely randomly.

Pair Corralation between HPQ Silicon and CVS HEALTH

Assuming the 90 days horizon HPQ Silicon Resources is expected to generate 1.46 times more return on investment than CVS HEALTH. However, HPQ Silicon is 1.46 times more volatile than CVS HEALTH CDR. It trades about -0.14 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about -0.55 per unit of risk. If you would invest  26.00  in HPQ Silicon Resources on September 24, 2024 and sell it today you would lose (3.00) from holding HPQ Silicon Resources or give up 11.54% of portfolio value over 90 days.

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

HPQ Silicon Resources  vs.  CVS HEALTH CDR

HPQ Silicon Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HPQ Silicon Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

CVS HEALTH CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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 HPQ Silicon and CVS HEALTH

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

The idea behind HPQ Silicon Resources and CVS HEALTH CDR 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.