Correlation Between HP and SohuCom

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

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

Diversification Opportunities for HP and SohuCom

0.06

Correlation Coefficient

HP  SohuCom

Significant diversification

The 3 months correlation between HP and SohuCom is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and SohuCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SohuCom 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 SohuCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SohuCom has no effect on the direction of HP i.e., HP and SohuCom go up and down completely randomly.

Pair Corralation between HP and SohuCom

Considering the 90-day investment horizon HP Inc is expected to under-perform the SohuCom. But the stock apears to be less risky and, when comparing its historical volatility, HP Inc is 1.01 times less risky than SohuCom. The stock trades about -0.21 of its potential returns per unit of risk. The SohuCom is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,048  in SohuCom on January 26, 2024 and sell it today you would earn a total of  75.00  from holding SohuCom or generate 7.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HP Inc  vs.  SohuCom

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

SohuCom

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SohuCom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, SohuCom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HP and SohuCom

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

The idea behind HP Inc and SohuCom 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..