Correlation Between HP and Industrias Penoles

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

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

Diversification Opportunities for HP and Industrias Penoles

0.4

Correlation Coefficient

HP  Industrias Penoles

Very weak diversification

The 3 months correlation between HP and Industrias is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Industrias Penoles Sab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias Penoles Sab 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 Industrias Penoles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias Penoles Sab has no effect on the direction of HP i.e., HP and Industrias Penoles go up and down completely randomly.

Pair Corralation between HP and Industrias Penoles

Considering the 90-day investment horizon HP Inc is expected to under-perform the Industrias Penoles. But the stock apears to be less risky and, when comparing its historical volatility, HP Inc is 3.44 times less risky than Industrias Penoles. The stock trades about -0.04 of its potential returns per unit of risk. The Industrias Penoles Sab is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,315  in Industrias Penoles Sab on November 29, 2024 and sell it today you would earn a total of  235.00  from holding Industrias Penoles Sab or generate 17.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	76.27%
Values	Daily Returns

HP Inc  vs.  Industrias Penoles Sab

HP Inc

Risk-Adjusted Performance

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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Industrias Penoles Sab

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrias Penoles Sab are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Industrias Penoles reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HP and Industrias Penoles

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

The idea behind HP Inc and Industrias Penoles Sab 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.