Correlation Between HP and Bald Eagle

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

Diversification Opportunities for HP and Bald Eagle

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between HP and BADEF is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Bald Eagle Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bald Eagle Gold 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 Bald Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bald Eagle Gold has no effect on the direction of HP i.e., HP and Bald Eagle go up and down completely randomly.

Pair Corralation between HP and Bald Eagle

Considering the 90-day investment horizon HP is expected to generate 4.76 times less return on investment than Bald Eagle. But when comparing it to its historical volatility, HP Inc is 2.4 times less risky than Bald Eagle. It trades about 0.17 of its potential returns per unit of risk. Bald Eagle Gold is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Bald Eagle Gold on September 3, 2022 and sell it today you would earn a total of  2.75  from holding Bald Eagle Gold or generate 55.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

HP Inc  vs.  Bald Eagle Gold

 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

Bald Eagle Gold 
BADEF Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bald Eagle Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Bald Eagle exhibited solid returns over the last few months and may actually be approaching a breakup point.

BADEF Price Channel

HP and Bald Eagle Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and Bald Eagle

The main advantage of trading using opposite HP and Bald Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Bald Eagle 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 Bald Eagle will offset losses from the drop in Bald Eagle's long position.
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The idea behind HP Inc and Bald Eagle Gold 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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