Correlation Between HYDROFARM HLD and Mapletree Industrial

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

Diversification Opportunities for HYDROFARM HLD and Mapletree Industrial

0.09

Correlation Coefficient

HYDROFARM HLD  Mapletree Industrial

Significant diversification

The 3 months correlation between HYDROFARM and Mapletree is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD GRP and Mapletree Industrial Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mapletree Industrial 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 Mapletree Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mapletree Industrial has no effect on the direction of HYDROFARM HLD i.e., HYDROFARM HLD and Mapletree Industrial go up and down completely randomly.

Pair Corralation between HYDROFARM HLD and Mapletree Industrial

Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to generate 3.38 times more return on investment than Mapletree Industrial. However, HYDROFARM HLD is 3.38 times more volatile than Mapletree Industrial Trust. It trades about -0.01 of its potential returns per unit of risk. Mapletree Industrial Trust is currently generating about -0.04 per unit of risk. If you would invest  61.00  in HYDROFARM HLD GRP on October 20, 2024 and sell it today you would lose (7.00) from holding HYDROFARM HLD GRP or give up 11.48% of portfolio value over 90 days.

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

HYDROFARM HLD GRP  vs.  Mapletree Industrial Trust

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.

Mapletree Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mapletree Industrial Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Mapletree Industrial 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 Mapletree Industrial

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

The idea behind HYDROFARM HLD GRP and Mapletree Industrial Trust 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.