Correlation Between HP and American Beacon
Can any of the company-specific risk be diversified away by investing in both HP and American Beacon 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 American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and American Beacon Small, you can compare the effects of market volatilities on HP and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and American Beacon.
Diversification Opportunities for HP and American Beacon
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HP and American is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and American Beacon Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Small 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Small has no effect on the direction of HP i.e., HP and American Beacon go up and down completely randomly.
Pair Corralation between HP and American Beacon
Considering the 90-day investment horizon HP Inc is expected to generate 15.02 times more return on investment than American Beacon. However, HP is 15.02 times more volatile than American Beacon Small. It trades about 0.03 of its potential returns per unit of risk. American Beacon Small is currently generating about -0.06 per unit of risk. If you would invest 3,348 in HP Inc on September 15, 2024 and sell it today you would earn a total of 102.00 from holding HP Inc or generate 3.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
HP Inc vs. American Beacon Small
Performance |
Timeline |
HP Inc |
American Beacon Small |
HP and American Beacon Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HP and American Beacon
The main advantage of trading using opposite HP and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.The idea behind HP Inc and American Beacon Small 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.American Beacon vs. Calamos Dynamic Convertible | American Beacon vs. Allianzgi Convertible Income | American Beacon vs. Putnam Convertible Incm Gwth | American Beacon vs. Rationalpier 88 Convertible |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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