Correlation Between HP and Northwest Bancshares

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

Diversification Opportunities for HP and Northwest Bancshares

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between HP and Northwest is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Northwest Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Bancshares 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 Northwest Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Bancshares has no effect on the direction of HP i.e., HP and Northwest Bancshares go up and down completely randomly.

Pair Corralation between HP and Northwest Bancshares

Considering the 90-day investment horizon HP Inc is expected to generate 1.97 times more return on investment than Northwest Bancshares. However, HP is 1.97 times more volatile than Northwest Bancshares. It trades about 0.05 of its potential returns per unit of risk. Northwest Bancshares is currently generating about 0.05 per unit of risk. If you would invest  2,772  in HP Inc on May 13, 2022 and sell it today you would earn a total of  650.00  from holding HP Inc or generate 23.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

HP Inc  vs.  Northwest Bancshares

 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

Northwest Bancshares 
Northwest Performance
20 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Northwest Bancshares are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, Northwest Bancshares reported solid returns over the last few months and may actually be approaching a breakup point.

Northwest Price Channel

HP and Northwest Bancshares Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and Northwest Bancshares

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

Northwest Bancshares

Pair trading matchups for Northwest Bancshares

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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