Correlation Between HP and TMT Acquisition

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

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

Diversification Opportunities for HP and TMT Acquisition

-0.13

Correlation Coefficient

HP  TMT Acquisition

Good diversification

The 3 months correlation between HP and TMT is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and TMT Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMT Acquisition Corp 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 TMT Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMT Acquisition Corp has no effect on the direction of HP i.e., HP and TMT Acquisition go up and down completely randomly.

Pair Corralation between HP and TMT Acquisition

Considering the 90-day investment horizon HP Inc is expected to under-perform the TMT Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, HP Inc is 5.36 times less risky than TMT Acquisition. The stock trades about -0.06 of its potential returns per unit of risk. The TMT Acquisition Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  37.00  in TMT Acquisition Corp on October 9, 2024 and sell it today you would earn a total of  1.00  from holding TMT Acquisition Corp or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	20.0%
Values	Daily Returns

HP Inc  vs.  TMT Acquisition Corp

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.

TMT Acquisition Corp

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days TMT Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively inconsistent fundamental indicators, TMT Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HP and TMT Acquisition

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

The idea behind HP Inc and TMT Acquisition Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.