Correlation Between Hydrofarm Holdings and Volvo AB

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

Diversification Opportunities for Hydrofarm Holdings and Volvo AB

-0.18

Correlation Coefficient

Hydrofarm Holdings  Volvo AB

Good diversification

The 3 months correlation between Hydrofarm and Volvo is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hydrofarm Holdings Group and Volvo AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB ser 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 Volvo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volvo AB ser has no effect on the direction of Hydrofarm Holdings i.e., Hydrofarm Holdings and Volvo AB go up and down completely randomly.

Pair Corralation between Hydrofarm Holdings and Volvo AB

Given the investment horizon of 90 days Hydrofarm Holdings is expected to generate 1.23 times less return on investment than Volvo AB. In addition to that, Hydrofarm Holdings is 2.32 times more volatile than Volvo AB ser. It trades about 0.02 of its total potential returns per unit of risk. Volvo AB ser is currently generating about 0.06 per unit of volatility. If you would invest  2,449  in Volvo AB ser on September 12, 2024 and sell it today you would earn a total of  151.00  from holding Volvo AB ser or generate 6.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Hydrofarm Holdings Group  vs.  Volvo AB ser

Hydrofarm Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hydrofarm Holdings Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Hydrofarm Holdings is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Volvo AB ser

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Volvo AB ser has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Volvo AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hydrofarm Holdings and Volvo AB

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

The idea behind Hydrofarm Holdings Group and Volvo AB ser 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.