Correlation Between Super Micro and HP

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

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

Diversification Opportunities for Super Micro and HP

0.49

Correlation Coefficient

Super Micro  HP

Very weak diversification

The 3 months correlation between Super and HP is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Super Micro Computer and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc and Super Micro 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 Super Micro Computer are associated (or correlated) with HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of Super Micro i.e., Super Micro and HP go up and down completely randomly.

Pair Corralation between Super Micro and HP

Given the investment horizon of 90 days Super Micro Computer is expected to generate 5.88 times more return on investment than HP. However, Super Micro is 5.88 times more volatile than HP Inc. It trades about 0.13 of its potential returns per unit of risk. HP Inc is currently generating about -0.07 per unit of risk. If you would invest  47,558  in Super Micro Computer on January 25, 2024 and sell it today you would earn a total of  28,628  from holding Super Micro Computer or generate 60.2% return on investment over 90 days.

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

Super Micro Computer  vs.  HP Inc

Super Micro Computer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Super Micro Computer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting fundamental indicators, Super Micro demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Super Micro and HP

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

The idea behind Super Micro Computer and HP Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.