Correlation Between HP and Vertiv Holdings

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

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

Diversification Opportunities for HP and Vertiv Holdings

0.82

Correlation Coefficient

HP  Vertiv Holdings

Very poor diversification

The 3 months correlation between HP and Vertiv is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Vertiv Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertiv 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 Vertiv Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertiv Holdings has no effect on the direction of HP i.e., HP and Vertiv Holdings go up and down completely randomly.

Pair Corralation between HP and Vertiv Holdings

Considering the 90-day investment horizon HP Inc is expected to under-perform the Vertiv Holdings. But the stock apears to be less risky and, when comparing its historical volatility, HP Inc is 1.67 times less risky than Vertiv Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The Vertiv Holdings Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  8,301  in Vertiv Holdings Co on August 30, 2024 and sell it today you would earn a total of  4,393  from holding Vertiv Holdings Co or generate 52.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

HP Inc  vs.  Vertiv Holdings Co

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Vertiv Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vertiv Holdings Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vertiv Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HP and Vertiv Holdings

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

The idea behind HP Inc and Vertiv Holdings Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.