Correlation Between WIMFARM SA and HYDROFARM HLD

Can any of the company-specific risk be diversified away by investing in both WIMFARM SA and HYDROFARM HLD 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 WIMFARM SA and HYDROFARM HLD into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WIMFARM SA EO and HYDROFARM HLD GRP, you can compare the effects of market volatilities on WIMFARM SA and HYDROFARM HLD 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 WIMFARM SA with a short position of HYDROFARM HLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of WIMFARM SA and HYDROFARM HLD.

Diversification Opportunities for WIMFARM SA and HYDROFARM HLD

0.21

Correlation Coefficient

WIMFARM SA  HYDROFARM HLD

Modest diversification

The 3 months correlation between WIMFARM and HYDROFARM is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding WIMFARM SA EO and HYDROFARM HLD GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYDROFARM HLD GRP and WIMFARM SA 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 WIMFARM SA EO are associated (or correlated) with HYDROFARM HLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYDROFARM HLD GRP has no effect on the direction of WIMFARM SA i.e., WIMFARM SA and HYDROFARM HLD go up and down completely randomly.

Pair Corralation between WIMFARM SA and HYDROFARM HLD

Assuming the 90 days horizon WIMFARM SA is expected to generate 5.78 times less return on investment than HYDROFARM HLD. But when comparing it to its historical volatility, WIMFARM SA EO is 1.02 times less risky than HYDROFARM HLD. It trades about 0.04 of its potential returns per unit of risk. HYDROFARM HLD GRP is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  44.00  in HYDROFARM HLD GRP on September 4, 2024 and sell it today you would earn a total of  33.00  from holding HYDROFARM HLD GRP or generate 75.0% return on investment over 90 days.

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

WIMFARM SA EO  vs.  HYDROFARM HLD GRP

WIMFARM SA EO

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WIMFARM SA EO are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WIMFARM SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HYDROFARM HLD GRP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HYDROFARM HLD GRP are ranked lower than 16 (%) 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.

Pair Trading with WIMFARM SA and HYDROFARM HLD

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

The idea behind WIMFARM SA EO and HYDROFARM HLD GRP 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.