Correlation Between Knowles Cor and Hewlett Packard

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

By analyzing existing cross correlation between Knowles Cor and Hewlett Packard Enterprise, you can compare the effects of market volatilities on Knowles Cor and Hewlett Packard 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 Knowles Cor with a short position of Hewlett Packard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knowles Cor and Hewlett Packard.

Diversification Opportunities for Knowles Cor and Hewlett Packard

0.89

Correlation Coefficient

Knowles Cor  Hewlett Packard

Very poor diversification

The 3 months correlation between Knowles and Hewlett is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Cor and Hewlett Packard Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hewlett Packard Ente and Knowles Cor 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 Knowles Cor are associated (or correlated) with Hewlett Packard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hewlett Packard Ente has no effect on the direction of Knowles Cor i.e., Knowles Cor and Hewlett Packard go up and down completely randomly.

Pair Corralation between Knowles Cor and Hewlett Packard

Allowing for the 90-day total investment horizon Knowles Cor is expected to generate 0.51 times more return on investment than Hewlett Packard. However, Knowles Cor is 1.96 times less risky than Hewlett Packard. It trades about -0.24 of its potential returns per unit of risk. Hewlett Packard Enterprise is currently generating about -0.16 per unit of risk. If you would invest  1,993  in Knowles Cor on December 28, 2024 and sell it today you would lose (388.00) from holding Knowles Cor or give up 19.47% of portfolio value over 90 days.

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

Knowles Cor  vs.  Hewlett Packard Enterprise

Knowles Cor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knowles Cor 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 very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Hewlett Packard Ente

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hewlett Packard Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Knowles Cor and Hewlett Packard

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

The idea behind Knowles Cor and Hewlett Packard Enterprise 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.