Correlation Between HYDROFARM HLD and Live Nation

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

Diversification Opportunities for HYDROFARM HLD and Live Nation

-0.36

Correlation Coefficient

HYDROFARM HLD  Live Nation

Very good diversification

The 3 months correlation between HYDROFARM and Live is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and Live Nation Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertainment 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 Live Nation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Nation Entertainment has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and Live Nation go up and down completely randomly.

Pair Corralation between HYDROFARM HLD and Live Nation

Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to generate 61.89 times more return on investment than Live Nation. However, HYDROFARM HLD is 61.89 times more volatile than Live Nation Entertainment. It trades about 0.11 of its potential returns per unit of risk. Live Nation Entertainment is currently generating about -0.06 per unit of risk. If you would invest  587.00  in HYDROFARM HLD GRP on December 27, 2024 and sell it today you would lose (57.00) from holding HYDROFARM HLD GRP or give up 9.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

HYDROFARM HLD GRP  vs.  Live Nation Entertainment

HYDROFARM HLD GRP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HYDROFARM HLD GRP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, HYDROFARM HLD reported solid returns over the last few months and may actually be approaching a breakup point.

Live Nation Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Live Nation Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HYDROFARM HLD and Live Nation

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

The idea behind HYDROFARM HLD GRP and Live Nation Entertainment 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.