Correlation Between HP and Etsy

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

Diversification Opportunities for HP and Etsy

-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between HP and Etsy is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy 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 Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of HP i.e., HP and Etsy go up and down completely randomly.

Pair Corralation between HP and Etsy

Considering the 90-day investment horizon HP Inc is expected to under-perform the Etsy. But the stock apears to be less risky and, when comparing its historical volatility, HP Inc is 2.13 times less risky than Etsy. The stock trades about -0.03 of its potential returns per unit of risk. The Etsy Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11,047  in Etsy Inc on May 18, 2022 and sell it today you would earn a total of  1,227  from holding Etsy Inc or generate 11.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

HP Inc  vs.  Etsy 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 newest stock price disarray, may contribute to short-term losses for the insiders.

HP Price Channel

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

Etsy Price Channel

HP and Etsy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and Etsy

The main advantage of trading using opposite HP and Etsy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Etsy 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 Etsy will offset losses from the drop in Etsy's long position.
The idea behind HP Inc and Etsy 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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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