Correlation Between Hydrofarm Holdings and Volvo AB
Can any of the company-specific risk be diversified away by investing in both Hydrofarm Holdings and Volvo AB 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 Holdings and Volvo AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hydrofarm Holdings Group and Volvo AB ADR, you can compare the effects of market volatilities on Hydrofarm Holdings and Volvo AB 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 Holdings with a short position of Volvo AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hydrofarm Holdings and Volvo AB.
Diversification Opportunities for Hydrofarm Holdings and Volvo AB
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hydrofarm and Volvo is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hydrofarm Holdings Group and Volvo AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB ADR and Hydrofarm 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 Hydrofarm Holdings Group are associated (or correlated) with Volvo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volvo AB ADR has no effect on the direction of Hydrofarm Holdings i.e., Hydrofarm Holdings and Volvo AB go up and down completely randomly.
Pair Corralation between Hydrofarm Holdings and Volvo AB
Given the investment horizon of 90 days Hydrofarm Holdings Group is expected to generate 3.41 times more return on investment than Volvo AB. However, Hydrofarm Holdings is 3.41 times more volatile than Volvo AB ADR. It trades about 0.02 of its potential returns per unit of risk. Volvo AB ADR is currently generating about 0.06 per unit of risk. If you would invest 95.00 in Hydrofarm Holdings Group on August 31, 2024 and sell it today you would lose (13.00) from holding Hydrofarm Holdings Group or give up 13.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hydrofarm Holdings Group vs. Volvo AB ADR
Performance |
| Timeline |
| Hydrofarm Holdings |
| Volvo AB ADR |
Hydrofarm Holdings and Volvo AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hydrofarm Holdings and Volvo AB
The main advantage of trading using opposite Hydrofarm Holdings and Volvo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hydrofarm Holdings position performs unexpectedly, Volvo AB 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 Volvo AB will offset losses from the drop in Volvo AB's long position.| Hydrofarm Holdings vs. Gencor Industries | Hydrofarm Holdings vs. CEA Industries | Hydrofarm Holdings vs. Arts Way Manufacturing Co | Hydrofarm Holdings vs. CubicFarm Systems Corp |
| Volvo AB vs. AB Volvo | Volvo AB vs. Deere Company | Volvo AB vs. Hino Motors Ltd | Volvo AB vs. Daimler Truck Holding |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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