Correlation Between New Era and Hewlett Packard

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

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

Diversification Opportunities for New Era and Hewlett Packard

-0.5

Correlation Coefficient

New Era  Hewlett Packard

Very good diversification

The 3 months correlation between New and Hewlett is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding New Era Helium 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 New Era 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 New Era Helium 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 New Era i.e., New Era and Hewlett Packard go up and down completely randomly.

Pair Corralation between New Era and Hewlett Packard

Given the investment horizon of 90 days New Era Helium is expected to generate 9.39 times more return on investment than Hewlett Packard. However, New Era is 9.39 times more volatile than Hewlett Packard Enterprise. It trades about 0.1 of its potential returns per unit of risk. Hewlett Packard Enterprise is currently generating about 0.26 per unit of risk. If you would invest  280.00  in New Era Helium on October 24, 2024 and sell it today you would earn a total of  28.89  from holding New Era Helium or generate 10.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

New Era Helium  vs.  Hewlett Packard Enterprise

New Era Helium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Era Helium 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 technical indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hewlett Packard Ente

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Hewlett Packard exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Era and Hewlett Packard

The main advantage of trading using opposite New Era and Hewlett Packard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Era 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 New Era Helium 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.