Correlation Between Hydratec Industries and Pershing Square

Can any of the company-specific risk be diversified away by investing in both Hydratec Industries and Pershing Square 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 Pershing Square 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 Pershing Square Holdings, you can compare the effects of market volatilities on Hydratec Industries and Pershing Square 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 Pershing Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hydratec Industries and Pershing Square.

Diversification Opportunities for Hydratec Industries and Pershing Square

-0.16

Correlation Coefficient

Hydratec Industries  Pershing Square

Good diversification

The 3 months correlation between Hydratec and Pershing is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hydratec Industries NV and Pershing Square Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pershing Square Holdings 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 Pershing Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pershing Square Holdings has no effect on the direction of Hydratec Industries i.e., Hydratec Industries and Pershing Square go up and down completely randomly.

Pair Corralation between Hydratec Industries and Pershing Square

Assuming the 90 days trading horizon Hydratec Industries NV is expected to generate 1.65 times more return on investment than Pershing Square. However, Hydratec Industries is 1.65 times more volatile than Pershing Square Holdings. It trades about 0.06 of its potential returns per unit of risk. Pershing Square Holdings is currently generating about 0.1 per unit of risk. If you would invest  15,100  in Hydratec Industries NV on September 19, 2024 and sell it today you would earn a total of  700.00  from holding Hydratec Industries NV or generate 4.64% return on investment over 90 days.

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

Hydratec Industries NV  vs.  Pershing Square Holdings

Hydratec Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hydratec Industries NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Hydratec Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Pershing Square Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pershing Square Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Pershing Square is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hydratec Industries and Pershing Square

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

The idea behind Hydratec Industries NV and Pershing Square Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.