Correlation Between HP and PIMCO Climate

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

Diversification Opportunities for HP and PIMCO Climate

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between HP and PIMCO is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and PIMCO Climate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Climate Bond 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 PIMCO Climate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Climate Bond has no effect on the direction of HP i.e., HP and PIMCO Climate go up and down completely randomly.

Pair Corralation between HP and PIMCO Climate

Considering the 90-day investment horizon HP Inc is expected to generate 9.12 times more return on investment than PIMCO Climate. However, HP is 9.12 times more volatile than PIMCO Climate Bond. It trades about 0.03 of its potential returns per unit of risk. PIMCO Climate Bond is currently generating about -0.09 per unit of risk. If you would invest  2,286  in HP Inc on September 10, 2022 and sell it today you would earn a total of  562.00  from holding HP Inc or generate 24.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

HP Inc  vs.  PIMCO Climate Bond

 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

PIMCO Climate Bond 
PIMCO Performance
0 of 100
Over the last 90 days PIMCO Climate Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, PIMCO Climate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PIMCO Price Channel

HP and PIMCO Climate Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HP and PIMCO Climate

The main advantage of trading using opposite HP and PIMCO Climate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, PIMCO Climate 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 PIMCO Climate will offset losses from the drop in PIMCO Climate's long position.
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The idea behind HP Inc and PIMCO Climate Bond 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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