Correlation Between CNH Industrial and Hydrofarm Holdings

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

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

Diversification Opportunities for CNH Industrial and Hydrofarm Holdings

-0.72

Correlation Coefficient

CNH Industrial  Hydrofarm Holdings

Pay attention - limited upside

The 3 months correlation between CNH and Hydrofarm is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and Hydrofarm Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydrofarm Holdings and CNH Industrial 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 CNH Industrial NV 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 CNH Industrial i.e., CNH Industrial and Hydrofarm Holdings go up and down completely randomly.

Pair Corralation between CNH Industrial and Hydrofarm Holdings

Given the investment horizon of 90 days CNH Industrial NV is expected to generate 0.41 times more return on investment than Hydrofarm Holdings. However, CNH Industrial NV is 2.47 times less risky than Hydrofarm Holdings. It trades about 0.01 of its potential returns per unit of risk. Hydrofarm Holdings Group is currently generating about 0.0 per unit of risk. If you would invest  1,143  in CNH Industrial NV on September 16, 2024 and sell it today you would earn a total of  2.00  from holding CNH Industrial NV or generate 0.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	34.27%
Values	Daily Returns

CNH Industrial NV  vs.  Hydrofarm Holdings Group

CNH Industrial NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNH Industrial NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, CNH Industrial is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Hydrofarm Holdings

Risk-Adjusted Performance

0 of 100

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 very healthy technical and fundamental indicators, Hydrofarm Holdings is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CNH Industrial and Hydrofarm Holdings

The main advantage of trading using opposite CNH Industrial and Hydrofarm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial 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 CNH Industrial NV 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.