Correlation Between HP and Chongqing Rural

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

By analyzing existing cross correlation between HP Inc and Chongqing Rural Commercial, you can compare the effects of market volatilities on HP and Chongqing Rural 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 Chongqing Rural. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Chongqing Rural.

Diversification Opportunities for HP and Chongqing Rural

-0.66

Correlation Coefficient

HP  Chongqing Rural

Excellent diversification

The 3 months correlation between HP and Chongqing is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Chongqing Rural Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Rural Comm 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 Chongqing Rural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Rural Comm has no effect on the direction of HP i.e., HP and Chongqing Rural go up and down completely randomly.

Pair Corralation between HP and Chongqing Rural

Considering the 90-day investment horizon HP Inc is expected to under-perform the Chongqing Rural. But the stock apears to be less risky and, when comparing its historical volatility, HP Inc is 3.19 times less risky than Chongqing Rural. The stock trades about -0.35 of its potential returns per unit of risk. The Chongqing Rural Commercial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,595  in Chongqing Rural Commercial on October 4, 2024 and sell it today you would lose (3.00) from holding Chongqing Rural Commercial or give up 0.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

HP Inc  vs.  Chongqing Rural Commercial

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 latest inconsistent performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Chongqing Rural Comm

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Rural Commercial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, Chongqing Rural showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HP and Chongqing Rural

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

The idea behind HP Inc and Chongqing Rural Commercial 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.