Correlation Between HP and International Equity

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

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

Diversification Opportunities for HP and International Equity

-0.58

Correlation Coefficient

HP  International Equity

Excellent diversification

The 3 months correlation between HP and International is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity 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 International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of HP i.e., HP and International Equity go up and down completely randomly.

Pair Corralation between HP and International Equity

Considering the 90-day investment horizon HP Inc is expected to under-perform the International Equity. In addition to that, HP is 1.86 times more volatile than International Equity Index. It trades about -0.11 of its total potential returns per unit of risk. International Equity Index is currently generating about 0.18 per unit of volatility. If you would invest  1,076  in International Equity Index on December 29, 2024 and sell it today you would earn a total of  103.00  from holding International Equity Index or generate 9.57% return on investment over 90 days.

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

HP Inc  vs.  International Equity Index

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 latest unsteady 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.

International Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Equity Index are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, International Equity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HP and International Equity

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

The idea behind HP Inc and International Equity 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.