Correlation Between HYDROFARM HLD and X FAB

Can any of the company-specific risk be diversified away by investing in both HYDROFARM HLD and X FAB 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 X FAB 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 X FAB Silicon Foundries, you can compare the effects of market volatilities on HYDROFARM HLD and X FAB 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 X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of HYDROFARM HLD and X FAB.

Diversification Opportunities for HYDROFARM HLD and X FAB

-0.12

Correlation Coefficient

HYDROFARM HLD  X FAB

Good diversification

The 3 months correlation between HYDROFARM and XFB is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and X FAB go up and down completely randomly.

Pair Corralation between HYDROFARM HLD and X FAB

Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to generate 2.34 times more return on investment than X FAB. However, HYDROFARM HLD is 2.34 times more volatile than X FAB Silicon Foundries. It trades about 0.26 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about 0.05 per unit of risk. If you would invest  55.00  in HYDROFARM HLD GRP on September 5, 2024 and sell it today you would earn a total of  20.00  from holding HYDROFARM HLD GRP or generate 36.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

HYDROFARM HLD GRP  vs.  X FAB Silicon Foundries

HYDROFARM HLD GRP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HYDROFARM HLD GRP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, HYDROFARM HLD reported solid returns over the last few months and may actually be approaching a breakup point.

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with HYDROFARM HLD and X FAB

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

The idea behind HYDROFARM HLD GRP and X FAB Silicon Foundries 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 the Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.