Correlation Between Near and HP

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

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

Diversification Opportunities for Near and HP

0.55

Correlation Coefficient

Near  HP

Very weak diversification

The 3 months correlation between Near and HP is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Near and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc and Near 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 Near are associated (or correlated) with HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of Near i.e., Near and HP go up and down completely randomly.

Pair Corralation between Near and HP

Assuming the 90 days trading horizon Near is expected to generate 4.78 times more return on investment than HP. However, Near is 4.78 times more volatile than HP Inc. It trades about 0.04 of its potential returns per unit of risk. HP Inc is currently generating about -0.23 per unit of risk. If you would invest  621.00  in Near on January 31, 2024 and sell it today you would earn a total of  4.00  from holding Near or generate 0.64% return on investment over 90 days.

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

Near  vs.  HP Inc

Near

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Near are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Near exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Near and HP

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

The idea behind Near and HP Inc 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.