Correlation Between CEA Industries and Hydrofarm Holdings
Can any of the company-specific risk be diversified away by investing in both CEA Industries 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 CEA Industries and Hydrofarm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CEA Industries Warrant and Hydrofarm Holdings Group, you can compare the effects of market volatilities on CEA Industries 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 CEA Industries with a short position of Hydrofarm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEA Industries and Hydrofarm Holdings.
Diversification Opportunities for CEA Industries and Hydrofarm Holdings
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between CEA and Hydrofarm is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries Warrant and Hydrofarm Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydrofarm Holdings and CEA Industries 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 CEA Industries Warrant 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 CEA Industries i.e., CEA Industries and Hydrofarm Holdings go up and down completely randomly.
Pair Corralation between CEA Industries and Hydrofarm Holdings
Assuming the 90 days horizon CEA Industries Warrant is expected to generate 50.65 times more return on investment than Hydrofarm Holdings. However, CEA Industries is 50.65 times more volatile than Hydrofarm Holdings Group. It trades about 0.21 of its potential returns per unit of risk. Hydrofarm Holdings Group is currently generating about -0.01 per unit of risk. If you would invest 1.56 in CEA Industries Warrant on September 3, 2024 and sell it today you would lose (0.46) from holding CEA Industries Warrant or give up 29.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 46.15% |
| Values | Daily Returns |
CEA Industries Warrant vs. Hydrofarm Holdings Group
Performance |
| Timeline |
| CEA Industries Warrant |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Hydrofarm Holdings |
CEA Industries and Hydrofarm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CEA Industries and Hydrofarm Holdings
The main advantage of trading using opposite CEA Industries and Hydrofarm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEA Industries 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.| CEA Industries vs. CEA Industries | CEA Industries vs. Thayer Ventures Acquisition | CEA Industries vs. Iveda Solutions Warrant |
| Hydrofarm Holdings vs. Gencor Industries | Hydrofarm Holdings vs. CEA Industries | Hydrofarm Holdings vs. Arts Way Manufacturing Co | Hydrofarm Holdings vs. CubicFarm Systems Corp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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