Correlation Between HP and Aarons

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

Diversification Opportunities for HP and Aarons

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between HP and Aarons is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Aarons Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarons Inc 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 Aarons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarons Inc has no effect on the direction of HP i.e., HP and Aarons go up and down completely randomly.

Pair Corralation between HP and Aarons

Considering the 90-day investment horizon HP is expected to generate 1.73 times less return on investment than Aarons. But when comparing it to its historical volatility, HP Inc is 2.15 times less risky than Aarons. It trades about 0.14 of its potential returns per unit of risk. Aarons Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  989.00  in Aarons Inc on September 2, 2022 and sell it today you would earn a total of  233.00  from holding Aarons Inc or generate 23.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

HP Inc  vs.  Aarons Inc

 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 sluggish basic indicators, HP may actually be approaching a critical reversion point that can send shares even higher in January 2023.

HP Price Channel

Aarons Inc 
Aarons Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Aarons Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish basic indicators, Aarons may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Aarons Price Channel

HP and Aarons Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and Aarons

The main advantage of trading using opposite HP and Aarons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Aarons 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 Aarons will offset losses from the drop in Aarons' long position.
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The idea behind HP Inc and Aarons 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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