Correlation Between Hydrofarm Holdings and Austin Engineering

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

By analyzing existing cross correlation between Hydrofarm Holdings Group and Austin Engineering Limited, you can compare the effects of market volatilities on Hydrofarm Holdings and Austin Engineering 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 Holdings with a short position of Austin Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hydrofarm Holdings and Austin Engineering.

Diversification Opportunities for Hydrofarm Holdings and Austin Engineering

-0.01

Correlation Coefficient

Hydrofarm Holdings  Austin Engineering

Good diversification

The 3 months correlation between Hydrofarm and Austin is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Hydrofarm Holdings Group and Austin Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austin Engineering and Hydrofarm Holdings 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 Holdings Group are associated (or correlated) with Austin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austin Engineering has no effect on the direction of Hydrofarm Holdings i.e., Hydrofarm Holdings and Austin Engineering go up and down completely randomly.

Pair Corralation between Hydrofarm Holdings and Austin Engineering

Given the investment horizon of 90 days Hydrofarm Holdings Group is expected to generate 0.78 times more return on investment than Austin Engineering. However, Hydrofarm Holdings Group is 1.29 times less risky than Austin Engineering. It trades about 0.18 of its potential returns per unit of risk. Austin Engineering Limited is currently generating about -0.03 per unit of risk. If you would invest  51.00  in Hydrofarm Holdings Group on September 2, 2024 and sell it today you would earn a total of  31.00  from holding Hydrofarm Holdings Group or generate 60.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Hydrofarm Holdings Group  vs.  Austin Engineering Limited

Hydrofarm Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hydrofarm Holdings Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Hydrofarm Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Austin Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Austin Engineering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Hydrofarm Holdings and Austin Engineering

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

The idea behind Hydrofarm Holdings Group and Austin Engineering Limited 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..