Correlation Between HYDROFARM HLD and PagerDuty

Can any of the company-specific risk be diversified away by investing in both HYDROFARM HLD and PagerDuty 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 PagerDuty 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 PagerDuty, you can compare the effects of market volatilities on HYDROFARM HLD and PagerDuty 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 PagerDuty. Check out your portfolio center. Please also check ongoing floating volatility patterns of HYDROFARM HLD and PagerDuty.

Diversification Opportunities for HYDROFARM HLD and PagerDuty

0.46

Correlation Coefficient

HYDROFARM HLD  PagerDuty

Very weak diversification

The 3 months correlation between HYDROFARM and PagerDuty is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and PagerDuty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PagerDuty 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 PagerDuty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PagerDuty has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and PagerDuty go up and down completely randomly.

Pair Corralation between HYDROFARM HLD and PagerDuty

Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to under-perform the PagerDuty. In addition to that, HYDROFARM HLD is 1.94 times more volatile than PagerDuty. It trades about -0.01 of its total potential returns per unit of risk. PagerDuty is currently generating about 0.05 per unit of volatility. If you would invest  1,649  in PagerDuty on October 9, 2024 and sell it today you would earn a total of  96.00  from holding PagerDuty or generate 5.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

HYDROFARM HLD GRP  vs.  PagerDuty

HYDROFARM HLD GRP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HYDROFARM HLD GRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, HYDROFARM HLD is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

PagerDuty

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PagerDuty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PagerDuty may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HYDROFARM HLD and PagerDuty

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

The idea behind HYDROFARM HLD GRP and PagerDuty 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.