Correlation Between HP and Demant AS

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

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

Diversification Opportunities for HP and Demant AS

0.21

Correlation Coefficient

HP  Demant AS

Modest diversification

The 3 months correlation between HP and Demant is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Demant AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Demant AS 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 Demant AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Demant AS has no effect on the direction of HP i.e., HP and Demant AS go up and down completely randomly.

Pair Corralation between HP and Demant AS

Considering the 90-day investment horizon HP Inc is expected to generate 0.97 times more return on investment than Demant AS. However, HP Inc is 1.03 times less risky than Demant AS. It trades about -0.21 of its potential returns per unit of risk. Demant AS is currently generating about -0.33 per unit of risk. If you would invest  2,968  in HP Inc on January 20, 2024 and sell it today you would lose (187.00) from holding HP Inc or give up 6.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.91%
Values	Daily Returns

HP Inc  vs.  Demant AS

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.

Demant AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Demant AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Demant AS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HP and Demant AS

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

The idea behind HP Inc and Demant AS 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.