Correlation Between HP and Canon

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

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

Diversification Opportunities for HP and Canon

-0.61

Correlation Coefficient

HP  Canon

Excellent diversification

The 3 months correlation between HP and Canon is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Canon Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canon Inc ADR 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 Canon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canon Inc ADR has no effect on the direction of HP i.e., HP and Canon go up and down completely randomly.

Pair Corralation between HP and Canon

Considering the 90-day investment horizon HP is expected to generate 13.73 times less return on investment than Canon. In addition to that, HP is 1.81 times more volatile than Canon Inc ADR. It trades about 0.0 of its total potential returns per unit of risk. Canon Inc ADR is currently generating about 0.08 per unit of volatility. If you would invest  2,147  in Canon Inc ADR on January 24, 2024 and sell it today you would earn a total of  43.00  from holding Canon Inc ADR or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	10.73%
Values	Daily Returns

HP Inc  vs.  Canon Inc ADR

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.

Canon Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canon Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Canon is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with HP and Canon

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

The idea behind HP Inc and Canon Inc ADR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.