Correlation Between HP and Axcella Health

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

Diversification Opportunities for HP and Axcella Health

-0.05
  Correlation Coefficient

Good diversification

The 3 months correlation between HP and Axcella is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Axcella Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axcella Health 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 Axcella Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axcella Health has no effect on the direction of HP i.e., HP and Axcella Health go up and down completely randomly.

Pair Corralation between HP and Axcella Health

Considering the 90-day investment horizon HP is expected to generate 1.61 times less return on investment than Axcella Health. But when comparing it to its historical volatility, HP Inc is 2.93 times less risky than Axcella Health. It trades about 0.19 of its potential returns per unit of risk. Axcella Health is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Axcella Health on May 11, 2022 and sell it today you would earn a total of  20.00  from holding Axcella Health or generate 9.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

HP Inc  vs.  Axcella Health

 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 current stock price disarray, may contribute to short-term losses for the insiders.

HP Price Channel

Axcella Health 
Axcella Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Axcella Health are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Axcella Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Axcella Price Channel

HP and Axcella Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and Axcella Health

The main advantage of trading using opposite HP and Axcella Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Axcella Health 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 Axcella Health will offset losses from the drop in Axcella Health's long position.
The idea behind HP Inc and Axcella Health 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.

Axcella Health

Pair trading matchups for Axcella Health

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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