Correlation Between HP and Applied Genetic

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

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

Diversification Opportunities for HP and Applied Genetic

-0.45

Correlation Coefficient

HP  Applied Genetic

Very good diversification

The 3 months correlation between HP and Applied is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Applied Genetic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Genetic 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 Applied Genetic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Genetic has no effect on the direction of HP i.e., HP and Applied Genetic go up and down completely randomly.

Pair Corralation between HP and Applied Genetic

If you would invest  2,770  in HP Inc on February 22, 2024 and sell it today you would earn a total of  531.00  from holding HP Inc or generate 19.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.35%
Values	Daily Returns

HP Inc  vs.  Applied Genetic

HP Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, HP reported solid returns over the last few months and may actually be approaching a breakup point.

Applied Genetic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Genetic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Applied Genetic is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HP and Applied Genetic

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

The idea behind HP Inc and Applied Genetic 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.