Correlation Between Fairwood Holdings and Hudson Technologies
Can any of the company-specific risk be diversified away by investing in both Fairwood Holdings 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 Fairwood Holdings and Hudson Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fairwood Holdings Limited and Hudson Technologies, you can compare the effects of market volatilities on Fairwood Holdings 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 Fairwood Holdings with a short position of Hudson Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairwood Holdings and Hudson Technologies.
Diversification Opportunities for Fairwood Holdings and Hudson Technologies
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairwood and Hudson is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Fairwood Holdings Limited and Hudson Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Technologies and Fairwood Holdings 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 Fairwood Holdings Limited 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 Fairwood Holdings i.e., Fairwood Holdings and Hudson Technologies go up and down completely randomly.
Pair Corralation between Fairwood Holdings and Hudson Technologies
Assuming the 90 days horizon Fairwood Holdings Limited is expected to generate 1.16 times more return on investment than Hudson Technologies. However, Fairwood Holdings is 1.16 times more volatile than Hudson Technologies. It trades about 0.1 of its potential returns per unit of risk. Hudson Technologies is currently generating about -0.09 per unit of risk. If you would invest 72.00 in Fairwood Holdings Limited on September 2, 2024 and sell it today you would earn a total of 33.00 from holding Fairwood Holdings Limited or generate 45.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairwood Holdings Limited vs. Hudson Technologies
Performance |
| Timeline |
| Fairwood Holdings |
| Hudson Technologies |
Fairwood Holdings and Hudson Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairwood Holdings and Hudson Technologies
The main advantage of trading using opposite Fairwood Holdings and Hudson Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairwood Holdings 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.| Fairwood Holdings vs. McDonalds | Fairwood Holdings vs. Starbucks | Fairwood Holdings vs. Chipotle Mexican Grill | Fairwood Holdings vs. Compass Group PLC |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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