Correlation Between HP and Adams Resources
Can any of the company-specific risk be diversified away by investing in both HP and Adams 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 Adams 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 Adams Resources Energy, you can compare the effects of market volatilities on HP and Adams 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 Adams Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Adams Resources.
Diversification Opportunities for HP and Adams Resources
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between HP and Adams is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Adams Resources Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Resources Energy 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 Adams Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Resources Energy has no effect on the direction of HP i.e., HP and Adams Resources go up and down completely randomly.
Pair Corralation between HP and Adams Resources
Considering the 90-day investment horizon HP Inc is expected to under-perform the Adams Resources. But the stock apears to be less risky and, when comparing its historical volatility, HP Inc is 1.57 times less risky than Adams Resources. The stock trades about -0.2 of its potential returns per unit of risk. The Adams Resources Energy is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,655 in Adams Resources Energy on January 25, 2024 and sell it today you would earn a total of 271.00 from holding Adams Resources Energy or generate 10.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
HP Inc vs. Adams Resources Energy
Performance |
Timeline |
HP Inc |
Adams Resources Energy |
HP and Adams Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HP and Adams Resources
The main advantage of trading using opposite HP and Adams Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Adams 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 Adams Resources will offset losses from the drop in Adams Resources' long position.The idea behind HP Inc and Adams Resources Energy 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.Adams Resources vs. Delek Energy | Adams Resources vs. Sunoco LP | Adams Resources vs. CVR Energy | Adams Resources vs. Phillips 66 |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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