Correlation Between HP and Optimize Strategy

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

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

Diversification Opportunities for HP and Optimize Strategy

0.87

Correlation Coefficient

HP  Optimize Strategy

Very poor diversification

The 3 months correlation between HP and Optimize is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Optimize Strategy Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimize Strategy Index 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 Optimize Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimize Strategy Index has no effect on the direction of HP i.e., HP and Optimize Strategy go up and down completely randomly.

Pair Corralation between HP and Optimize Strategy

Considering the 90-day investment horizon HP Inc is expected to under-perform the Optimize Strategy. In addition to that, HP is 2.12 times more volatile than Optimize Strategy Index. It trades about -0.02 of its total potential returns per unit of risk. Optimize Strategy Index is currently generating about 0.18 per unit of volatility. If you would invest  2,784  in Optimize Strategy Index on August 30, 2024 and sell it today you would earn a total of  327.00  from holding Optimize Strategy Index or generate 11.75% return on investment over 90 days.

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

HP Inc  vs.  Optimize Strategy Index

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

Optimize Strategy Index

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optimize Strategy Index are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Optimize Strategy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with HP and Optimize Strategy

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

The idea behind HP Inc and Optimize Strategy Index 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.