Correlation Between Chewy and HP

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

Diversification Opportunities for Chewy and HP

-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Chewy and HP is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chewy Inc and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc and Chewy 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 Chewy Inc 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 Chewy i.e., Chewy and HP go up and down completely randomly.

Pair Corralation between Chewy and HP

Given the investment horizon of 90 days Chewy is expected to generate 11.08 times less return on investment than HP. In addition to that, Chewy is 2.09 times more volatile than HP Inc. It trades about 0.0 of its total potential returns per unit of risk. HP Inc is currently generating about 0.06 per unit of volatility. If you would invest  2,602  in HP Inc on May 10, 2022 and sell it today you would earn a total of  743.00  from holding HP Inc or generate 28.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Chewy Inc  vs.  HP Inc

 Performance (%) 
       Timeline  
Chewy Inc 
Chewy Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chewy Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Chewy showed solid returns over the last few months and may actually be approaching a breakup point.

Chewy Price Channel

HP Inc 
HP Performance
0 of 100
Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm insiders.

HP Price Channel

Chewy and HP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chewy and HP

The main advantage of trading using opposite Chewy and HP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chewy 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 Chewy Inc 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.
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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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