Correlation Between HP and CAPITAL

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

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

Diversification Opportunities for HP and CAPITAL

0.0

Correlation Coefficient

HP  CAPITAL

Pay attention - limited upside

The 3 months correlation between HP and CAPITAL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and CAPITAL ONE FINL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAPITAL ONE FINL 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 CAPITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAPITAL ONE FINL has no effect on the direction of HP i.e., HP and CAPITAL go up and down completely randomly.

Pair Corralation between HP and CAPITAL

If you would invest  2,693  in HP Inc on November 20, 2024 and sell it today you would earn a total of  671.00  from holding HP Inc or generate 24.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.2%
Values	Daily Returns

HP Inc  vs.  CAPITAL ONE FINL

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 uncertain 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.

CAPITAL ONE FINL

Risk-Adjusted Performance

Weak

Over the last 90 days CAPITAL ONE FINL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CAPITAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HP and CAPITAL

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

The idea behind HP Inc and CAPITAL ONE FINL 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.