Correlation Between IShares SP and Hydratec Industries

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

By analyzing existing cross correlation between iShares SP 500 and Hydratec Industries NV, you can compare the effects of market volatilities on IShares SP and Hydratec Industries 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 IShares SP with a short position of Hydratec Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Hydratec Industries.

Diversification Opportunities for IShares SP and Hydratec Industries

-0.46

Correlation Coefficient

IShares SP  Hydratec Industries

Very good diversification

The 3 months correlation between IShares and Hydratec is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Hydratec Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydratec Industries and IShares SP 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 iShares SP 500 are associated (or correlated) with Hydratec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hydratec Industries has no effect on the direction of IShares SP i.e., IShares SP and Hydratec Industries go up and down completely randomly.

Pair Corralation between IShares SP and Hydratec Industries

Assuming the 90 days trading horizon iShares SP 500 is expected to under-perform the Hydratec Industries. But the etf apears to be less risky and, when comparing its historical volatility, iShares SP 500 is 2.9 times less risky than Hydratec Industries. The etf trades about -0.27 of its potential returns per unit of risk. The Hydratec Industries NV is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14,700  in Hydratec Industries NV on September 21, 2024 and sell it today you would earn a total of  1,300  from holding Hydratec Industries NV or generate 8.84% return on investment over 90 days.

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

iShares SP 500  vs.  Hydratec Industries NV

iShares SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SP 500 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 Etf's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

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.

Pair Trading with IShares SP and Hydratec Industries

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

The idea behind iShares SP 500 and Hydratec Industries NV 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.