Correlation Between HYDROFARM HLD and Brother Industries

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

Diversification Opportunities for HYDROFARM HLD and Brother Industries

-0.05

Correlation Coefficient

HYDROFARM HLD  Brother Industries

Good diversification

The 3 months correlation between HYDROFARM and Brother is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and Brother Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brother Industries 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 Brother Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brother Industries has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and Brother Industries go up and down completely randomly.

Pair Corralation between HYDROFARM HLD and Brother Industries

Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to under-perform the Brother Industries. In addition to that, HYDROFARM HLD is 1.89 times more volatile than Brother Industries. It trades about -0.03 of its total potential returns per unit of risk. Brother Industries is currently generating about 0.02 per unit of volatility. If you would invest  1,620  in Brother Industries on September 24, 2024 and sell it today you would earn a total of  30.00  from holding Brother Industries or generate 1.85% return on investment over 90 days.

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

HYDROFARM HLD GRP  vs.  Brother Industries

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Brother Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with HYDROFARM HLD and Brother Industries

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

The idea behind HYDROFARM HLD GRP and Brother Industries 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 Global Correlations module to find global opportunities by holding instruments from different markets.