Correlation Between Dana and Hudson Technologies
Can any of the company-specific risk be diversified away by investing in both Dana and Hudson Technologies 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 Dana and Hudson Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dana Inc and Hudson Technologies, you can compare the effects of market volatilities on Dana and Hudson Technologies 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 Dana with a short position of Hudson Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana and Hudson Technologies.
Diversification Opportunities for Dana and Hudson Technologies
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dana and Hudson is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and Hudson Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Technologies and Dana 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 Dana Inc are associated (or correlated) with Hudson Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Technologies has no effect on the direction of Dana i.e., Dana and Hudson Technologies go up and down completely randomly.
Pair Corralation between Dana and Hudson Technologies
Considering the 90-day investment horizon Dana Inc is expected to generate 0.87 times more return on investment than Hudson Technologies. However, Dana Inc is 1.15 times less risky than Hudson Technologies. It trades about -0.02 of its potential returns per unit of risk. Hudson Technologies is currently generating about -0.02 per unit of risk. If you would invest 1,583 in Dana Inc on August 31, 2024 and sell it today you would lose (571.00) from holding Dana Inc or give up 36.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Dana Inc vs. Hudson Technologies
Performance |
| Timeline |
| Dana Inc |
| Hudson Technologies |
Dana and Hudson Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dana and Hudson Technologies
The main advantage of trading using opposite Dana and Hudson Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dana position performs unexpectedly, Hudson Technologies 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 Hudson Technologies will offset losses from the drop in Hudson Technologies' long position.The idea behind Dana Inc and Hudson Technologies 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.| Hudson Technologies vs. Sensient Technologies | Hudson Technologies vs. Innospec | Hudson Technologies vs. H B Fuller | Hudson Technologies vs. Quaker Chemical |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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