Correlation Between HPQ Silicon and GoGold Resources

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

Diversification Opportunities for HPQ Silicon and GoGold Resources

-0.55

Correlation Coefficient

HPQ Silicon  GoGold Resources

Excellent diversification

The 3 months correlation between HPQ and GoGold is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding HPQ Silicon Resources and GoGold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoGold Resources 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 GoGold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoGold Resources has no effect on the direction of HPQ Silicon i.e., HPQ Silicon and GoGold Resources go up and down completely randomly.

Pair Corralation between HPQ Silicon and GoGold Resources

Assuming the 90 days horizon HPQ Silicon Resources is expected to under-perform the GoGold Resources. In addition to that, HPQ Silicon is 1.33 times more volatile than GoGold Resources. It trades about -0.01 of its total potential returns per unit of risk. GoGold Resources is currently generating about 0.25 per unit of volatility. If you would invest  112.00  in GoGold Resources on December 21, 2024 and sell it today you would earn a total of  72.00  from holding GoGold Resources or generate 64.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

HPQ Silicon Resources  vs.  GoGold Resources

HPQ Silicon Resources

Risk-Adjusted Performance

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 fairly stable basic indicators, HPQ Silicon is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

GoGold Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GoGold Resources are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, GoGold Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HPQ Silicon and GoGold Resources

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

The idea behind HPQ Silicon Resources and GoGold Resources 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.