Correlation Between HP and Vinci SA

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

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

Diversification Opportunities for HP and Vinci SA

-0.62

Correlation Coefficient

HP  Vinci SA

Excellent diversification

The 3 months correlation between HP and Vinci is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Vinci SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vinci SA ADR 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 Vinci SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vinci SA ADR has no effect on the direction of HP i.e., HP and Vinci SA go up and down completely randomly.

Pair Corralation between HP and Vinci SA

Considering the 90-day investment horizon HP Inc is expected to generate 1.48 times more return on investment than Vinci SA. However, HP is 1.48 times more volatile than Vinci SA ADR. It trades about 0.04 of its potential returns per unit of risk. Vinci SA ADR is currently generating about -0.14 per unit of risk. If you would invest  3,504  in HP Inc on September 4, 2024 and sell it today you would earn a total of  141.00  from holding HP Inc or generate 4.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

HP Inc  vs.  Vinci SA ADR

HP Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Vinci SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vinci SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with HP and Vinci SA

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

The idea behind HP Inc and Vinci SA ADR 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.