Correlation Between H-FARM SPA and Indutrade

Can any of the company-specific risk be diversified away by investing in both H-FARM SPA and Indutrade 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 H-FARM SPA and Indutrade into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between H FARM SPA and Indutrade AB, you can compare the effects of market volatilities on H-FARM SPA and Indutrade 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 H-FARM SPA with a short position of Indutrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of H-FARM SPA and Indutrade.

Diversification Opportunities for H-FARM SPA and Indutrade

0.2

Correlation Coefficient

H-FARM SPA  Indutrade

Modest diversification

The 3 months correlation between H-FARM and Indutrade is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding H FARM SPA and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and H-FARM SPA 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 H FARM SPA are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of H-FARM SPA i.e., H-FARM SPA and Indutrade go up and down completely randomly.

Pair Corralation between H-FARM SPA and Indutrade

Assuming the 90 days horizon H FARM SPA is expected to generate 5.47 times more return on investment than Indutrade. However, H-FARM SPA is 5.47 times more volatile than Indutrade AB. It trades about 0.06 of its potential returns per unit of risk. Indutrade AB is currently generating about 0.1 per unit of risk. If you would invest  12.00  in H FARM SPA on December 29, 2024 and sell it today you would earn a total of  1.00  from holding H FARM SPA or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

H FARM SPA  vs.  Indutrade AB

H FARM SPA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in H FARM SPA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, H-FARM SPA reported solid returns over the last few months and may actually be approaching a breakup point.

Indutrade AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indutrade AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Indutrade may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with H-FARM SPA and Indutrade

The main advantage of trading using opposite H-FARM SPA and Indutrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H-FARM SPA position performs unexpectedly, Indutrade 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 Indutrade will offset losses from the drop in Indutrade's long position.

The idea behind H FARM SPA and Indutrade AB 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.