Correlation Between Hydratec Industries and Aperam SA

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

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

Diversification Opportunities for Hydratec Industries and Aperam SA

0.71

Correlation Coefficient

Hydratec Industries  Aperam SA

Poor diversification

The 3 months correlation between Hydratec and Aperam is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hydratec Industries NV and Aperam SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aperam SA and Hydratec Industries 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 Hydratec Industries NV are associated (or correlated) with Aperam SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aperam SA has no effect on the direction of Hydratec Industries i.e., Hydratec Industries and Aperam SA go up and down completely randomly.

Pair Corralation between Hydratec Industries and Aperam SA

Assuming the 90 days trading horizon Hydratec Industries NV is expected to generate 2.14 times more return on investment than Aperam SA. However, Hydratec Industries is 2.14 times more volatile than Aperam SA. It trades about 0.06 of its potential returns per unit of risk. Aperam SA is currently generating about 0.02 per unit of risk. If you would invest  7,500  in Hydratec Industries NV on September 4, 2024 and sell it today you would earn a total of  8,500  from holding Hydratec Industries NV or generate 113.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Hydratec Industries NV  vs.  Aperam SA

Hydratec Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hydratec Industries NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Hydratec Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aperam SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aperam SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Aperam SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hydratec Industries and Aperam SA

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

The idea behind Hydratec Industries NV and Aperam SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.