Correlation Between HP and American Public

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Can any of the company-specific risk be diversified away by investing in both HP and American Public 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 American Public into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and American Public Education, you can compare the effects of market volatilities on HP and American Public 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 American Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and American Public.

Diversification Opportunities for HP and American Public

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between HP and American is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and American Public Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Public Education 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 American Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Public Education has no effect on the direction of HP i.e., HP and American Public go up and down completely randomly.

Pair Corralation between HP and American Public

Considering the 90-day investment horizon HP is expected to generate 1.15 times less return on investment than American Public. In addition to that, HP is 1.04 times more volatile than American Public Education. It trades about 0.17 of its total potential returns per unit of risk. American Public Education is currently generating about 0.2 per unit of volatility. If you would invest  1,239  in American Public Education on September 3, 2022 and sell it today you would earn a total of  139.00  from holding American Public Education or generate 11.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

HP Inc  vs.  American Public Education

 Performance (%) 
       Timeline  
HP Inc 
HP Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, HP may actually be approaching a critical reversion point that can send shares even higher in January 2023.

HP Price Channel

American Public Education 
American Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, American Public reported solid returns over the last few months and may actually be approaching a breakup point.

American Price Channel

HP and American Public Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and American Public

The main advantage of trading using opposite HP and American Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, American Public 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 American Public will offset losses from the drop in American Public's long position.
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The idea behind HP Inc and American Public Education 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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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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