Correlation Between HP and Elfun Income

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

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

Diversification Opportunities for HP and Elfun Income

-0.68

Correlation Coefficient

HP  Elfun Income

Excellent diversification

The 3 months correlation between HP and Elfun is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Elfun Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elfun Income 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 Elfun Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elfun Income has no effect on the direction of HP i.e., HP and Elfun Income go up and down completely randomly.

Pair Corralation between HP and Elfun Income

Considering the 90-day investment horizon HP Inc is expected to under-perform the Elfun Income. In addition to that, HP is 11.07 times more volatile than Elfun Income Fund. It trades about -0.08 of its total potential returns per unit of risk. Elfun Income Fund is currently generating about 0.17 per unit of volatility. If you would invest  957.00  in Elfun Income Fund on September 13, 2024 and sell it today you would earn a total of  10.00  from holding Elfun Income Fund or generate 1.04% return on investment over 90 days.

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

HP Inc  vs.  Elfun Income Fund

HP Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, HP is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Elfun Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elfun Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Elfun Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HP and Elfun Income

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

The idea behind HP Inc and Elfun Income Fund 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.