Correlation Between ADTRAN and HP

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Can any of the company-specific risk be diversified away by investing in both ADTRAN 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 ADTRAN and HP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADTRAN Inc and HP Inc, you can compare the effects of market volatilities on ADTRAN 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 ADTRAN with a short position of HP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADTRAN and HP.

Diversification Opportunities for ADTRAN and HP

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between ADTRAN and HP is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding ADTRAN Inc and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc and ADTRAN 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 ADTRAN Inc 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 ADTRAN i.e., ADTRAN and HP go up and down completely randomly.

Pair Corralation between ADTRAN and HP

Given the investment horizon of 90 days ADTRAN Inc is expected to under-perform the HP. In addition to that, ADTRAN is 2.1 times more volatile than HP Inc. It trades about -0.08 of its total potential returns per unit of risk. HP Inc is currently generating about 0.04 per unit of volatility. If you would invest  2,537  in HP Inc on December 29, 2023 and sell it today you would earn a total of  475.00  from holding HP Inc or generate 18.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ADTRAN Inc  vs.  HP Inc

 Performance 
       Timeline  
ADTRAN Inc 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days ADTRAN Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
HP Inc 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 1 (%) 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.

ADTRAN and HP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ADTRAN and HP

The main advantage of trading using opposite ADTRAN and HP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADTRAN 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 ADTRAN Inc 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.
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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