Correlation Between HP and Hewlett Packard

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

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

Diversification Opportunities for HP and Hewlett Packard

0.9

Correlation Coefficient

HP  Hewlett Packard

Almost no diversification

The 3 months correlation between HP and Hewlett is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc 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 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 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 HP i.e., HP and Hewlett Packard go up and down completely randomly.

Pair Corralation between HP and Hewlett Packard

Considering the 90-day investment horizon HP Inc is expected to under-perform the Hewlett Packard. In addition to that, HP is 1.14 times more volatile than Hewlett Packard Enterprise. It trades about -0.09 of its total potential returns per unit of risk. Hewlett Packard Enterprise is currently generating about 0.09 per unit of volatility. If you would invest  1,987  in Hewlett Packard Enterprise on August 30, 2024 and sell it today you would earn a total of  93.00  from holding Hewlett Packard Enterprise or generate 4.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

HP Inc  vs.  Hewlett Packard Enterprise

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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Hewlett Packard Ente

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Hewlett Packard may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with HP and Hewlett Packard

The main advantage of trading using opposite HP and Hewlett Packard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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 HP Inc 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.