Correlation Between HYDROFARM HLD and Cogent Communications
Can any of the company-specific risk be diversified away by investing in both HYDROFARM HLD and Cogent Communications 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 HLD and Cogent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HYDROFARM HLD GRP and Cogent Communications Holdings, you can compare the effects of market volatilities on HYDROFARM HLD and Cogent Communications 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 HLD with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of HYDROFARM HLD and Cogent Communications.
Diversification Opportunities for HYDROFARM HLD and Cogent Communications
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between HYDROFARM and Cogent is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and HYDROFARM HLD 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 HLD GRP are associated (or correlated) with Cogent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Communications has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and Cogent Communications go up and down completely randomly.
Pair Corralation between HYDROFARM HLD and Cogent Communications
Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to generate 3.47 times more return on investment than Cogent Communications. However, HYDROFARM HLD is 3.47 times more volatile than Cogent Communications Holdings. It trades about -0.03 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about -0.23 per unit of risk. If you would invest 60.00 in HYDROFARM HLD GRP on September 23, 2024 and sell it today you would lose (4.00) from holding HYDROFARM HLD GRP or give up 6.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HYDROFARM HLD GRP vs. Cogent Communications Holdings
Performance |
| Timeline |
| HYDROFARM HLD GRP |
| Cogent Communications |
HYDROFARM HLD and Cogent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HYDROFARM HLD and Cogent Communications
The main advantage of trading using opposite HYDROFARM HLD and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HYDROFARM HLD position performs unexpectedly, Cogent Communications 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 Cogent Communications will offset losses from the drop in Cogent Communications' long position.| HYDROFARM HLD vs. Caterpillar | HYDROFARM HLD vs. Caterpillar | HYDROFARM HLD vs. Deere Company | HYDROFARM HLD vs. AB Volvo |
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Check out your portfolio center.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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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