Correlation Between Astec Industries and Hydrofarm Holdings

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

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

Diversification Opportunities for Astec Industries and Hydrofarm Holdings

-0.69

Correlation Coefficient

Astec Industries  Hydrofarm Holdings

Excellent diversification

The 3 months correlation between Astec and Hydrofarm is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Astec Industries and Hydrofarm Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydrofarm Holdings and Astec 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 Astec Industries are associated (or correlated) with Hydrofarm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hydrofarm Holdings has no effect on the direction of Astec Industries i.e., Astec Industries and Hydrofarm Holdings go up and down completely randomly.

Pair Corralation between Astec Industries and Hydrofarm Holdings

Given the investment horizon of 90 days Astec Industries is expected to generate 0.5 times more return on investment than Hydrofarm Holdings. However, Astec Industries is 2.01 times less risky than Hydrofarm Holdings. It trades about 0.05 of its potential returns per unit of risk. Hydrofarm Holdings Group is currently generating about -0.28 per unit of risk. If you would invest  3,299  in Astec Industries on December 30, 2024 and sell it today you would earn a total of  204.00  from holding Astec Industries or generate 6.18% return on investment over 90 days.

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

Astec Industries  vs.  Hydrofarm Holdings Group

Astec Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Astec Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Astec Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hydrofarm Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hydrofarm Holdings Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Astec Industries and Hydrofarm Holdings

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

The idea behind Astec Industries and Hydrofarm Holdings Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.