Correlation Between HYDROFARM HLD and Bumitama Agri

Can any of the company-specific risk be diversified away by investing in both HYDROFARM HLD and Bumitama Agri 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 HLD and Bumitama Agri into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HYDROFARM HLD GRP and Bumitama Agri, you can compare the effects of market volatilities on HYDROFARM HLD and Bumitama Agri 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 HLD with a short position of Bumitama Agri. Check out your portfolio center. Please also check ongoing floating volatility patterns of HYDROFARM HLD and Bumitama Agri.

Diversification Opportunities for HYDROFARM HLD and Bumitama Agri

0.19

Correlation Coefficient

HYDROFARM HLD  Bumitama Agri

Average diversification

The 3 months correlation between HYDROFARM and Bumitama is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and Bumitama Agri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumitama Agri and HYDROFARM HLD 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 HLD GRP are associated (or correlated) with Bumitama Agri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumitama Agri has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and Bumitama Agri go up and down completely randomly.

Pair Corralation between HYDROFARM HLD and Bumitama Agri

Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to generate 2.96 times more return on investment than Bumitama Agri. However, HYDROFARM HLD is 2.96 times more volatile than Bumitama Agri. It trades about 0.22 of its potential returns per unit of risk. Bumitama Agri is currently generating about 0.19 per unit of risk. If you would invest  50.00  in HYDROFARM HLD GRP on September 15, 2024 and sell it today you would earn a total of  14.00  from holding HYDROFARM HLD GRP or generate 28.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

HYDROFARM HLD GRP  vs.  Bumitama Agri

HYDROFARM HLD GRP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HYDROFARM HLD GRP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HYDROFARM HLD may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bumitama Agri

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bumitama Agri are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bumitama Agri reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HYDROFARM HLD and Bumitama Agri

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

The idea behind HYDROFARM HLD GRP and Bumitama Agri 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.