Correlation Between HYDROFARM HLD and Southern
Can any of the company-specific risk be diversified away by investing in both HYDROFARM HLD and Southern 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 Southern 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 The Southern, you can compare the effects of market volatilities on HYDROFARM HLD and Southern 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 Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of HYDROFARM HLD and Southern.
Diversification Opportunities for HYDROFARM HLD and Southern
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between HYDROFARM and Southern is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and The Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and Southern go up and down completely randomly.
Pair Corralation between HYDROFARM HLD and Southern
Assuming the 90 days trading horizon HYDROFARM HLD is expected to generate 3.31 times less return on investment than Southern. In addition to that, HYDROFARM HLD is 3.85 times more volatile than The Southern. It trades about 0.01 of its total potential returns per unit of risk. The Southern is currently generating about 0.09 per unit of volatility. If you would invest 6,261 in The Southern on September 14, 2024 and sell it today you would earn a total of 1,685 from holding The Southern or generate 26.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
HYDROFARM HLD GRP vs. The Southern
Performance |
| Timeline |
| HYDROFARM HLD GRP |
| Southern |
HYDROFARM HLD and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HYDROFARM HLD and Southern
The main advantage of trading using opposite HYDROFARM HLD and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HYDROFARM HLD position performs unexpectedly, Southern 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 Southern will offset losses from the drop in Southern's long position.| HYDROFARM HLD vs. AB Volvo | HYDROFARM HLD vs. Daimler Truck Holding | HYDROFARM HLD vs. Superior Plus Corp | HYDROFARM HLD vs. SIVERS SEMICONDUCTORS AB |
| Southern vs. NextEra Energy | Southern vs. PGE Corporation | Southern vs. Xcel Energy | Southern vs. Consolidated Edison |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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