Correlation Between Hayward Holdings and Powell Industries

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

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

Diversification Opportunities for Hayward Holdings and Powell Industries

0.75

Correlation Coefficient

Hayward Holdings  Powell Industries

Poor diversification

The 3 months correlation between Hayward and Powell is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hayward Holdings and Powell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powell Industries and Hayward Holdings 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 Hayward Holdings are associated (or correlated) with Powell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powell Industries has no effect on the direction of Hayward Holdings i.e., Hayward Holdings and Powell Industries go up and down completely randomly.

Pair Corralation between Hayward Holdings and Powell Industries

Given the investment horizon of 90 days Hayward Holdings is expected to generate 2.55 times less return on investment than Powell Industries. But when comparing it to its historical volatility, Hayward Holdings is 3.0 times less risky than Powell Industries. It trades about 0.17 of its potential returns per unit of risk. Powell Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  16,998  in Powell Industries on September 14, 2024 and sell it today you would earn a total of  8,202  from holding Powell Industries or generate 48.25% return on investment over 90 days.

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

Hayward Holdings  vs.  Powell Industries

Hayward Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hayward Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hayward Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Powell Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Powell Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Powell Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hayward Holdings and Powell Industries

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

The idea behind Hayward Holdings and Powell Industries 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.