Correlation Between HP and Anheuser Busch

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

Diversification Opportunities for HP and Anheuser Busch

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between HP and Anheuser is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Anheuser Busch Inbev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch Inbev 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 Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch Inbev has no effect on the direction of HP i.e., HP and Anheuser Busch go up and down completely randomly.

Pair Corralation between HP and Anheuser Busch

Considering the 90-day investment horizon HP is expected to generate 1.78 times less return on investment than Anheuser Busch. In addition to that, HP is 1.39 times more volatile than Anheuser Busch Inbev. It trades about 0.0 of its total potential returns per unit of risk. Anheuser Busch Inbev is currently generating about 0.01 per unit of volatility. If you would invest  5,958  in Anheuser Busch Inbev on September 10, 2022 and sell it today you would lose (1.00)  from holding Anheuser Busch Inbev or give up 0.02% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

HP Inc  vs.  Anheuser Busch Inbev

 Performance (%) 
       Timeline  
HP Inc 
HP Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, HP is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the insiders.

HP Price Channel

Anheuser Busch Inbev 
Anheuser Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Anheuser Busch Inbev are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Anheuser Busch exhibited solid returns over the last few months and may actually be approaching a breakup point.

Anheuser Price Channel

HP and Anheuser Busch Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and Anheuser Busch

The main advantage of trading using opposite HP and Anheuser Busch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Anheuser Busch 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 Anheuser Busch will offset losses from the drop in Anheuser Busch's long position.
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The idea behind HP Inc and Anheuser Busch Inbev 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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