Correlation Between Key Tronic and Hewlett Packard

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

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

Diversification Opportunities for Key Tronic and Hewlett Packard

-0.37

Correlation Coefficient

Key Tronic  Hewlett Packard

Very good diversification

The 3 months correlation between Key and Hewlett is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Key Tronic 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 Key Tronic 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 Key Tronic 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 Key Tronic i.e., Key Tronic and Hewlett Packard go up and down completely randomly.

Pair Corralation between Key Tronic and Hewlett Packard

Given the investment horizon of 90 days Key Tronic is expected to under-perform the Hewlett Packard. But the stock apears to be less risky and, when comparing its historical volatility, Key Tronic is 1.46 times less risky than Hewlett Packard. The stock trades about -0.63 of its potential returns per unit of risk. The Hewlett Packard Enterprise is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,199  in Hewlett Packard Enterprise on September 27, 2024 and sell it today you would lose (10.00) from holding Hewlett Packard Enterprise or give up 0.45% of portfolio value over 90 days.

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

Key Tronic  vs.  Hewlett Packard Enterprise

Key Tronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Key Tronic 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 fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hewlett Packard Ente

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Hewlett Packard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Key Tronic and Hewlett Packard

The main advantage of trading using opposite Key Tronic and Hewlett Packard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Key Tronic 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 Key Tronic 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.