Correlation Between Pershing Square and Hydratec Industries
Can any of the company-specific risk be diversified away by investing in both Pershing Square and Hydratec Industries 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 Pershing Square and Hydratec Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pershing Square Holdings and Hydratec Industries NV, you can compare the effects of market volatilities on Pershing Square and Hydratec Industries 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 Pershing Square with a short position of Hydratec Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pershing Square and Hydratec Industries.
Diversification Opportunities for Pershing Square and Hydratec Industries
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pershing and Hydratec is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Pershing Square Holdings and Hydratec Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydratec Industries and Pershing Square 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 Pershing Square Holdings are associated (or correlated) with Hydratec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hydratec Industries has no effect on the direction of Pershing Square i.e., Pershing Square and Hydratec Industries go up and down completely randomly.
Pair Corralation between Pershing Square and Hydratec Industries
Assuming the 90 days trading horizon Pershing Square is expected to generate 3.24 times less return on investment than Hydratec Industries. But when comparing it to its historical volatility, Pershing Square Holdings is 3.15 times less risky than Hydratec Industries. It trades about 0.06 of its potential returns per unit of risk. Hydratec Industries NV is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,719 in Hydratec Industries NV on September 2, 2024 and sell it today you would earn a total of 9,281 from holding Hydratec Industries NV or generate 138.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pershing Square Holdings vs. Hydratec Industries NV
Performance |
| Timeline |
| Pershing Square Holdings |
| Hydratec Industries |
Pershing Square and Hydratec Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pershing Square and Hydratec Industries
The main advantage of trading using opposite Pershing Square and Hydratec Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pershing Square position performs unexpectedly, Hydratec Industries 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 Hydratec Industries will offset losses from the drop in Hydratec Industries' long position.The idea behind Pershing Square Holdings and Hydratec Industries NV 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.| Hydratec Industries vs. Holland Colours NV | Hydratec Industries vs. NV Nederlandsche Apparatenfabriek | Hydratec Industries vs. Amsterdam Commodities NV | Hydratec Industries vs. TKH Group NV |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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