Correlation Between HP and BBX Capital

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

By analyzing existing cross correlation between HP Inc and BBX Capital, you can compare the effects of market volatilities on HP and BBX Capital 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 HP with a short position of BBX Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and BBX Capital.

Diversification Opportunities for HP and BBX Capital

-0.67

Correlation Coefficient

HP  BBX Capital

Excellent diversification

The 3 months correlation between HP and BBX is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and BBX Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBX Capital and HP 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 HP Inc are associated (or correlated) with BBX Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBX Capital has no effect on the direction of HP i.e., HP and BBX Capital go up and down completely randomly.

Pair Corralation between HP and BBX Capital

Considering the 90-day investment horizon HP Inc is expected to under-perform the BBX Capital. In addition to that, HP is 8.23 times more volatile than BBX Capital. It trades about -0.07 of its total potential returns per unit of risk. BBX Capital is currently generating about -0.14 per unit of volatility. If you would invest  781.00  in BBX Capital on August 31, 2024 and sell it today you would lose (9.00) from holding BBX Capital or give up 1.15% of portfolio value over 90 days.

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

HP Inc  vs.  BBX Capital

HP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, HP is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

BBX Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBX Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, BBX Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HP and BBX Capital

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

The idea behind HP Inc and BBX Capital 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.