Correlation Between Hudson Technologies and Valens

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

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

Diversification Opportunities for Hudson Technologies and Valens

0.5

Correlation Coefficient

Hudson Technologies  Valens

Very weak diversification

The 3 months correlation between Hudson and Valens is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Technologies and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens and Hudson 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 Hudson Technologies are associated (or correlated) with Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of Hudson Technologies i.e., Hudson Technologies and Valens go up and down completely randomly.

Pair Corralation between Hudson Technologies and Valens

Given the investment horizon of 90 days Hudson Technologies is expected to under-perform the Valens. But the stock apears to be less risky and, when comparing its historical volatility, Hudson Technologies is 1.1 times less risky than Valens. The stock trades about -0.11 of its potential returns per unit of risk. The Valens is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  212.00  in Valens on September 2, 2024 and sell it today you would lose (15.00) from holding Valens or give up 7.08% of portfolio value over 90 days.

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

Hudson Technologies  vs.  Valens

Hudson Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hudson Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Valens

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Valens is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hudson Technologies and Valens

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

The idea behind Hudson Technologies and Valens 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 CEOs Directory module to screen CEOs from public companies around the world.