Correlation Between Canon and HP

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

Diversification Opportunities for Canon and HP

0.1
  Correlation Coefficient

Average diversification

The 3 months correlation between Canon and HP is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Canon Inc and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc and Canon 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 Canon 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 Canon i.e., Canon and HP go up and down completely randomly.

Pair Corralation between Canon and HP

Assuming the 90 days horizon Canon Inc is expected to generate 0.98 times more return on investment than HP. However, Canon Inc is 1.02 times less risky than HP. It trades about 0.03 of its potential returns per unit of risk. HP Inc is currently generating about 0.01 per unit of risk. If you would invest  2,746  in Canon Inc on December 29, 2023 and sell it today you would earn a total of  208.00  from holding Canon Inc or generate 7.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Canon Inc  vs.  HP Inc

 Performance 
       Timeline  
Canon Inc 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Canon Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Canon reported solid returns over the last few months and may actually be approaching a breakup point.
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.

Canon and HP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Canon and HP

The main advantage of trading using opposite Canon and HP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canon 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 Canon 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.
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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