Correlation Between HP and AMERICAN

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

By analyzing existing cross correlation between HP Inc and AMERICAN EXPRESS 405, you can compare the effects of market volatilities on HP and AMERICAN 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 AMERICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and AMERICAN.

Diversification Opportunities for HP and AMERICAN

0.6

Correlation Coefficient

HP  AMERICAN

Poor diversification

The 3 months correlation between HP and AMERICAN is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and AMERICAN EXPRESS 405 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN EXPRESS 405 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN EXPRESS 405 has no effect on the direction of HP i.e., HP and AMERICAN go up and down completely randomly.

Pair Corralation between HP and AMERICAN

Considering the 90-day investment horizon HP Inc is expected to under-perform the AMERICAN. In addition to that, HP is 1.21 times more volatile than AMERICAN EXPRESS 405. It trades about -0.07 of its total potential returns per unit of risk. AMERICAN EXPRESS 405 is currently generating about 0.2 per unit of volatility. If you would invest  8,427  in AMERICAN EXPRESS 405 on December 3, 2024 and sell it today you would earn a total of  955.00  from holding AMERICAN EXPRESS 405 or generate 11.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

HP Inc  vs.  AMERICAN EXPRESS 405

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

AMERICAN EXPRESS 405

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AMERICAN EXPRESS 405 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HP and AMERICAN

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

The idea behind HP Inc and AMERICAN EXPRESS 405 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.