Correlation Between HP and NewAmsterdam Pharma

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

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

Diversification Opportunities for HP and NewAmsterdam Pharma

0.65

Correlation Coefficient

HP  NewAmsterdam Pharma

Poor diversification

The 3 months correlation between HP and NewAmsterdam is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and NewAmsterdam Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewAmsterdam Pharma 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 NewAmsterdam Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewAmsterdam Pharma has no effect on the direction of HP i.e., HP and NewAmsterdam Pharma go up and down completely randomly.

Pair Corralation between HP and NewAmsterdam Pharma

Considering the 90-day investment horizon HP Inc is expected to under-perform the NewAmsterdam Pharma. But the stock apears to be less risky and, when comparing its historical volatility, HP Inc is 1.71 times less risky than NewAmsterdam Pharma. The stock trades about -0.02 of its potential returns per unit of risk. The NewAmsterdam Pharma is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,642  in NewAmsterdam Pharma on August 30, 2024 and sell it today you would earn a total of  438.00  from holding NewAmsterdam Pharma or generate 26.67% return on investment over 90 days.

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

HP Inc  vs.  NewAmsterdam Pharma

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.

NewAmsterdam Pharma

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewAmsterdam Pharma are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, NewAmsterdam Pharma unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HP and NewAmsterdam Pharma

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

The idea behind HP Inc and NewAmsterdam Pharma 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.