Correlation Between Dell Technologies and HP

Can any of the company-specific risk be diversified away by investing in both Dell Technologies and HP 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 Dell Technologies and HP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dell Technologies and HP Inc, you can compare the effects of market volatilities on Dell Technologies and HP 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 Dell Technologies with a short position of HP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dell Technologies and HP.

Diversification Opportunities for Dell Technologies and HP

0.54

Correlation Coefficient

Dell Technologies  HP

Very weak diversification

The 3 months correlation between Dell and HP is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc and Dell Technologies 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 Dell Technologies are associated (or correlated) with HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of Dell Technologies i.e., Dell Technologies and HP go up and down completely randomly.

Pair Corralation between Dell Technologies and HP

Given the investment horizon of 90 days Dell Technologies is expected to generate 1.53 times more return on investment than HP. However, Dell Technologies is 1.53 times more volatile than HP Inc. It trades about 0.08 of its potential returns per unit of risk. HP Inc is currently generating about 0.02 per unit of risk. If you would invest  4,642  in Dell Technologies on March 14, 2024 and sell it today you would earn a total of  8,522  from holding Dell Technologies or generate 183.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Dell Technologies  vs.  HP Inc

Dell Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Dell Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.

HP Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, HP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dell Technologies and HP

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

The idea behind Dell Technologies and HP 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.

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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 the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .