Correlation Between HYDROFARM HLD and EVS Broadcast

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

Diversification Opportunities for HYDROFARM HLD and EVS Broadcast

0.06

Correlation Coefficient

HYDROFARM HLD  EVS Broadcast

Significant diversification

The 3 months correlation between HYDROFARM and EVS is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and EVS Broadcast Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVS Broadcast Equipment 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 EVS Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVS Broadcast Equipment has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and EVS Broadcast go up and down completely randomly.

Pair Corralation between HYDROFARM HLD and EVS Broadcast

Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to generate 4.49 times more return on investment than EVS Broadcast. However, HYDROFARM HLD is 4.49 times more volatile than EVS Broadcast Equipment. It trades about 0.23 of its potential returns per unit of risk. EVS Broadcast Equipment is currently generating about -0.05 per unit of risk. If you would invest  40.00  in HYDROFARM HLD GRP on September 3, 2024 and sell it today you would earn a total of  37.00  from holding HYDROFARM HLD GRP or generate 92.5% return on investment over 90 days.

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

HYDROFARM HLD GRP  vs.  EVS Broadcast Equipment

HYDROFARM HLD GRP

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HYDROFARM HLD GRP are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HYDROFARM HLD reported solid returns over the last few months and may actually be approaching a breakup point.

EVS Broadcast Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EVS Broadcast Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, EVS Broadcast is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HYDROFARM HLD and EVS Broadcast

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

The idea behind HYDROFARM HLD GRP and EVS Broadcast Equipment 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.