Correlation Between HP and Alfi

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

Diversification Opportunities for HP and Alfi

-0.65
  Correlation Coefficient

Excellent diversification

The 3 months correlation between HP and Alfi is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Alfi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfi 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 Alfi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfi Inc has no effect on the direction of HP i.e., HP and Alfi go up and down completely randomly.

Pair Corralation between HP and Alfi

Considering the 90-day investment horizon HP Inc is expected to generate 0.21 times more return on investment than Alfi. However, HP Inc is 4.78 times less risky than Alfi. It trades about -0.02 of its potential returns per unit of risk. Alfi Inc is currently generating about -0.11 per unit of risk. If you would invest  3,451  in HP Inc on September 9, 2022 and sell it today you would lose (668.00)  from holding HP Inc or give up 19.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.6%
ValuesDaily Returns

HP Inc  vs.  Alfi Inc

 Performance (%) 
       Timeline  
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 very healthy basic indicators, HP is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the insiders.

HP Price Channel

Alfi Inc 
Alfi Performance
0 of 100
Over the last 90 days Alfi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2023. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Alfi Price Channel

HP and Alfi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and Alfi

The main advantage of trading using opposite HP and Alfi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Alfi 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 Alfi will offset losses from the drop in Alfi's long position.
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The idea behind HP Inc and Alfi 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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