Correlation Between HP and BCM Resources

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

By analyzing existing cross correlation between HP Inc and BCM Resources, you can compare the effects of market volatilities on HP and BCM Resources 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 BCM Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and BCM Resources.

Diversification Opportunities for HP and BCM Resources

-0.67

Correlation Coefficient

HP  BCM Resources

Excellent diversification

The 3 months correlation between HP and BCM is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and BCM Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCM Resources 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 BCM Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCM Resources has no effect on the direction of HP i.e., HP and BCM Resources go up and down completely randomly.

Pair Corralation between HP and BCM Resources

Considering the 90-day investment horizon HP Inc is expected to generate 0.21 times more return on investment than BCM Resources. However, HP Inc is 4.81 times less risky than BCM Resources. It trades about 0.0 of its potential returns per unit of risk. BCM Resources is currently generating about -0.01 per unit of risk. If you would invest  3,509  in HP Inc on August 31, 2024 and sell it today you would lose (43.00) from holding HP Inc or give up 1.23% of portfolio value over 90 days.

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

HP Inc  vs.  BCM Resources

HP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, HP is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

BCM Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCM Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HP and BCM Resources

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

The idea behind HP Inc and BCM Resources 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.