Correlation Between HPQ Silicon and KDA

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

Diversification Opportunities for HPQ Silicon and KDA

0.64

Correlation Coefficient

HPQ Silicon  KDA

Poor diversification

The 3 months correlation between HPQ and KDA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding HPQ Silicon Resources and KDA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KDA Group 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 KDA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KDA Group has no effect on the direction of HPQ Silicon i.e., HPQ Silicon and KDA go up and down completely randomly.

Pair Corralation between HPQ Silicon and KDA

Assuming the 90 days horizon HPQ Silicon is expected to generate 23.04 times less return on investment than KDA. In addition to that, HPQ Silicon is 1.05 times more volatile than KDA Group. It trades about 0.02 of its total potential returns per unit of risk. KDA Group is currently generating about 0.4 per unit of volatility. If you would invest  21.00  in KDA Group on September 15, 2024 and sell it today you would earn a total of  7.00  from holding KDA Group or generate 33.33% return on investment over 90 days.

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

HPQ Silicon Resources  vs.  KDA Group

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 unfluctuating 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.

KDA Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KDA Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, KDA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HPQ Silicon and KDA

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

The idea behind HPQ Silicon Resources and KDA Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.