Correlation Between HP and Ovintiv

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

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

Diversification Opportunities for HP and Ovintiv

0.03

Correlation Coefficient

HP  Ovintiv

Significant diversification

The 3 months correlation between HP and Ovintiv is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Ovintiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ovintiv 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 Ovintiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ovintiv has no effect on the direction of HP i.e., HP and Ovintiv go up and down completely randomly.

Pair Corralation between HP and Ovintiv

Considering the 90-day investment horizon HP is expected to generate 1.26 times less return on investment than Ovintiv. But when comparing it to its historical volatility, HP Inc is 1.08 times less risky than Ovintiv. It trades about 0.11 of its potential returns per unit of risk. Ovintiv is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,408  in Ovintiv on February 19, 2024 and sell it today you would earn a total of  571.00  from holding Ovintiv or generate 12.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

HP Inc  vs.  Ovintiv

HP Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, HP may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Ovintiv

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ovintiv are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Ovintiv may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with HP and Ovintiv

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

The idea behind HP Inc and Ovintiv 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.