Correlation Between HYDROFARM HLD and WIMFARM SA

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

By analyzing existing cross correlation between HYDROFARM HLD GRP and WIMFARM SA EO, you can compare the effects of market volatilities on HYDROFARM HLD and WIMFARM SA 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 HYDROFARM HLD with a short position of WIMFARM SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of HYDROFARM HLD and WIMFARM SA.

Diversification Opportunities for HYDROFARM HLD and WIMFARM SA

0.37

Correlation Coefficient

HYDROFARM HLD  WIMFARM SA

Weak diversification

The 3 months correlation between HYDROFARM and WIMFARM is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and WIMFARM SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIMFARM SA EO and HYDROFARM HLD 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 HYDROFARM HLD GRP are associated (or correlated) with WIMFARM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIMFARM SA EO has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and WIMFARM SA go up and down completely randomly.

Pair Corralation between HYDROFARM HLD and WIMFARM SA

Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to generate 1.05 times more return on investment than WIMFARM SA. However, HYDROFARM HLD is 1.05 times more volatile than WIMFARM SA EO. It trades about 0.23 of its potential returns per unit of risk. WIMFARM SA EO is currently generating about 0.04 per unit of risk. If you would invest  40.00  in HYDROFARM HLD GRP on August 31, 2024 and sell it today you would earn a total of  36.00  from holding HYDROFARM HLD GRP or generate 90.0% return on investment over 90 days.

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

HYDROFARM HLD GRP  vs.  WIMFARM SA EO

HYDROFARM HLD GRP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HYDROFARM HLD GRP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HYDROFARM HLD reported solid returns over the last few months and may actually be approaching a breakup point.

WIMFARM SA EO

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WIMFARM SA EO are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WIMFARM SA may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with HYDROFARM HLD and WIMFARM SA

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

The idea behind HYDROFARM HLD GRP and WIMFARM SA EO 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..