Correlation Between HP and US Silica

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Can any of the company-specific risk be diversified away by investing in both HP and US Silica 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 US Silica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and US Silica Holdings, you can compare the effects of market volatilities on HP and US Silica 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 US Silica. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and US Silica.

Diversification Opportunities for HP and US Silica

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between HP and SLCA is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and US Silica Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Silica Holdings 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 US Silica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Silica Holdings has no effect on the direction of HP i.e., HP and US Silica go up and down completely randomly.

Pair Corralation between HP and US Silica

Considering the 90-day investment horizon HP Inc is expected to generate 0.32 times more return on investment than US Silica. However, HP Inc is 3.09 times less risky than US Silica. It trades about 0.04 of its potential returns per unit of risk. US Silica Holdings is currently generating about -0.03 per unit of risk. If you would invest  2,523  in HP Inc on September 19, 2024 and sell it today you would earn a total of  726.00  from holding HP Inc or generate 28.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy80.44%
ValuesDaily Returns

HP Inc  vs.  US Silica Holdings

 Performance 
       Timeline  
HP Inc 

Risk-Adjusted Performance

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Weak
 
Strong
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 recent stock price agitation, may contribute to short-term losses for the retail investors.
US Silica Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days US Silica Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, US Silica is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

HP and US Silica Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and US Silica

The main advantage of trading using opposite HP and US Silica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, US Silica 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 US Silica will offset losses from the drop in US Silica's long position.
The idea behind HP Inc and US Silica Holdings 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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