Correlation Between Harn Engineering and Hydrotek Public

Can any of the company-specific risk be diversified away by investing in both Harn Engineering and Hydrotek Public 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 Harn Engineering and Hydrotek Public into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Harn Engineering Solutions and Hydrotek Public, you can compare the effects of market volatilities on Harn Engineering and Hydrotek Public 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 Harn Engineering with a short position of Hydrotek Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harn Engineering and Hydrotek Public.

Diversification Opportunities for Harn Engineering and Hydrotek Public

0.39

Correlation Coefficient

Harn Engineering  Hydrotek Public

Weak diversification

The 3 months correlation between Harn and Hydrotek is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Harn Engineering Solutions and Hydrotek Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydrotek Public and Harn Engineering 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 Harn Engineering Solutions are associated (or correlated) with Hydrotek Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hydrotek Public has no effect on the direction of Harn Engineering i.e., Harn Engineering and Hydrotek Public go up and down completely randomly.

Pair Corralation between Harn Engineering and Hydrotek Public

Assuming the 90 days trading horizon Harn Engineering is expected to generate 16.48 times less return on investment than Hydrotek Public. But when comparing it to its historical volatility, Harn Engineering Solutions is 9.11 times less risky than Hydrotek Public. It trades about 0.05 of its potential returns per unit of risk. Hydrotek Public is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Hydrotek Public on September 17, 2024 and sell it today you would earn a total of  1.00  from holding Hydrotek Public or generate 9.09% return on investment over 90 days.

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

Harn Engineering Solutions  vs.  Hydrotek Public

Harn Engineering Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harn Engineering Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Harn Engineering is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Hydrotek Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hydrotek Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Harn Engineering and Hydrotek Public

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

The idea behind Harn Engineering Solutions and Hydrotek Public 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.