Correlation Between Lightning EMotors and Hydrofarm Holdings

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

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

Diversification Opportunities for Lightning EMotors and Hydrofarm Holdings

-0.39

Correlation Coefficient

Lightning EMotors  Hydrofarm Holdings

Very good diversification

The 3 months correlation between Lightning and Hydrofarm is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lightning EMotors and Hydrofarm Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydrofarm Holdings and Lightning EMotors 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 Lightning EMotors are associated (or correlated) with Hydrofarm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hydrofarm Holdings has no effect on the direction of Lightning EMotors i.e., Lightning EMotors and Hydrofarm Holdings go up and down completely randomly.

Pair Corralation between Lightning EMotors and Hydrofarm Holdings

If you would invest  68.00  in Hydrofarm Holdings Group on August 30, 2024 and sell it today you would earn a total of  15.00  from holding Hydrofarm Holdings Group or generate 22.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.35%
Values	Daily Returns

Lightning EMotors  vs.  Hydrofarm Holdings Group

Lightning EMotors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lightning EMotors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Lightning EMotors is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Hydrofarm Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hydrofarm Holdings Group are ranked lower than 17 (%) 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.

Pair Trading with Lightning EMotors and Hydrofarm Holdings

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

The idea behind Lightning EMotors and Hydrofarm Holdings Group 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 CEOs Directory module to screen CEOs from public companies around the world.