Correlation Between ABM Industries and Hudson Technologies

Can any of the company-specific risk be diversified away by investing in both ABM Industries and Hudson Technologies 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 ABM Industries and Hudson Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ABM Industries Incorporated and Hudson Technologies, you can compare the effects of market volatilities on ABM Industries and Hudson Technologies 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 ABM Industries with a short position of Hudson Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABM Industries and Hudson Technologies.

Diversification Opportunities for ABM Industries and Hudson Technologies

-0.36

Correlation Coefficient

ABM Industries  Hudson Technologies

Very good diversification

The 3 months correlation between ABM and Hudson is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding ABM Industries Incorporated and Hudson Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Technologies and ABM Industries 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 ABM Industries Incorporated are associated (or correlated) with Hudson Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Technologies has no effect on the direction of ABM Industries i.e., ABM Industries and Hudson Technologies go up and down completely randomly.

Pair Corralation between ABM Industries and Hudson Technologies

Considering the 90-day investment horizon ABM Industries Incorporated is expected to under-perform the Hudson Technologies. But the stock apears to be less risky and, when comparing its historical volatility, ABM Industries Incorporated is 1.02 times less risky than Hudson Technologies. The stock trades about -0.05 of its potential returns per unit of risk. The Hudson Technologies is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  540.00  in Hudson Technologies on December 27, 2024 and sell it today you would earn a total of  89.00  from holding Hudson Technologies or generate 16.48% return on investment over 90 days.

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

ABM Industries Incorporated  vs.  Hudson Technologies

ABM Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days ABM Industries Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, ABM Industries is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Hudson Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Hudson Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABM Industries and Hudson Technologies

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

The idea behind ABM Industries Incorporated and Hudson Technologies 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.