Correlation Between LOWES and Hudson Pacific

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

By analyzing existing cross correlation between LOWES INC 465 and Hudson Pacific Properties, you can compare the effects of market volatilities on LOWES and Hudson Pacific 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 LOWES with a short position of Hudson Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOWES and Hudson Pacific.

Diversification Opportunities for LOWES and Hudson Pacific

0.09

Correlation Coefficient

LOWES  Hudson Pacific

Significant diversification

The 3 months correlation between LOWES and Hudson is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding LOWES INC 465 and Hudson Pacific Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Pacific Properties and LOWES 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 LOWES INC 465 are associated (or correlated) with Hudson Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Pacific Properties has no effect on the direction of LOWES i.e., LOWES and Hudson Pacific go up and down completely randomly.

Pair Corralation between LOWES and Hudson Pacific

Assuming the 90 days trading horizon LOWES is expected to generate 2.4 times less return on investment than Hudson Pacific. But when comparing it to its historical volatility, LOWES INC 465 is 2.55 times less risky than Hudson Pacific. It trades about 0.11 of its potential returns per unit of risk. Hudson Pacific Properties is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  286.00  in Hudson Pacific Properties on December 2, 2024 and sell it today you would earn a total of  42.00  from holding Hudson Pacific Properties or generate 14.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	62.5%
Values	Daily Returns

LOWES INC 465  vs.  Hudson Pacific Properties

LOWES INC 465

Risk-Adjusted Performance

Very Weak

Over the last 90 days LOWES INC 465 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LOWES is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hudson Pacific Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hudson Pacific Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with LOWES and Hudson Pacific

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

The idea behind LOWES INC 465 and Hudson Pacific Properties 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.