Correlation Between HP and Harbor Long

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

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

Diversification Opportunities for HP and Harbor Long

-0.4

Correlation Coefficient

HP  Harbor Long

Very good diversification

The 3 months correlation between HP and Harbor is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Harbor Long Term Growers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Long Term 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 Harbor Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Long Term has no effect on the direction of HP i.e., HP and Harbor Long go up and down completely randomly.

Pair Corralation between HP and Harbor Long

Considering the 90-day investment horizon HP Inc is expected to under-perform the Harbor Long. In addition to that, HP is 1.34 times more volatile than Harbor Long Term Growers. It trades about -0.24 of its total potential returns per unit of risk. Harbor Long Term Growers is currently generating about -0.06 per unit of volatility. If you would invest  2,809  in Harbor Long Term Growers on October 7, 2024 and sell it today you would lose (45.00) from holding Harbor Long Term Growers or give up 1.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

HP Inc  vs.  Harbor Long Term Growers

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.

Harbor Long Term

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Long Term Growers are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Harbor Long may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HP and Harbor Long

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

The idea behind HP Inc and Harbor Long Term Growers 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.