Correlation Between HYDROFARM HLD and Deere

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

Diversification Opportunities for HYDROFARM HLD and Deere

0.56

Correlation Coefficient

HYDROFARM HLD  Deere

Very weak diversification

The 3 months correlation between HYDROFARM and Deere is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company 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 Deere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deere Company has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and Deere go up and down completely randomly.

Pair Corralation between HYDROFARM HLD and Deere

Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to generate 3.15 times more return on investment than Deere. However, HYDROFARM HLD is 3.15 times more volatile than Deere Company. It trades about 0.23 of its potential returns per unit of risk. Deere Company is currently generating about 0.25 per unit of risk. If you would invest  40.00  in HYDROFARM HLD GRP on September 1, 2024 and sell it today you would earn a total of  36.00  from holding HYDROFARM HLD GRP or generate 90.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

HYDROFARM HLD GRP  vs.  Deere Company

HYDROFARM HLD GRP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HYDROFARM HLD GRP are ranked lower than 17 (%) 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.

Deere Company

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Deere unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HYDROFARM HLD and Deere

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

The idea behind HYDROFARM HLD GRP and Deere Company 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 Transaction History module to view history of all your transactions and understand their impact on performance.