Correlation Between HP and CNA Financial
Can any of the company-specific risk be diversified away by investing in both HP and CNA Financial 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 CNA Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and CNA Financial, you can compare the effects of market volatilities on HP and CNA Financial 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 CNA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and CNA Financial.
Diversification Opportunities for HP and CNA Financial
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between HP and CNA is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and CNA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNA Financial 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 CNA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNA Financial has no effect on the direction of HP i.e., HP and CNA Financial go up and down completely randomly.
Pair Corralation between HP and CNA Financial
Considering the 90-day investment horizon HP Inc is expected to under-perform the CNA Financial. In addition to that, HP is 1.3 times more volatile than CNA Financial. It trades about -0.21 of its total potential returns per unit of risk. CNA Financial is currently generating about -0.01 per unit of volatility. If you would invest 4,436 in CNA Financial on January 26, 2024 and sell it today you would lose (13.00) from holding CNA Financial or give up 0.29% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
HP Inc vs. CNA Financial
Performance |
Timeline |
HP Inc |
CNA Financial |
HP and CNA Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HP and CNA Financial
The main advantage of trading using opposite HP and CNA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, CNA Financial 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 CNA Financial will offset losses from the drop in CNA Financial's long position.The idea behind HP Inc and CNA Financial 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.CNA Financial vs. Selective Insurance Group | CNA Financial vs. Kemper | CNA Financial vs. Donegal Group B | CNA Financial vs. Argo Group International |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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