Correlation Between Hudson Technologies and Arm Holdings

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

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

Diversification Opportunities for Hudson Technologies and Arm Holdings

0.62

Correlation Coefficient

Hudson Technologies  Arm Holdings

Poor diversification

The 3 months correlation between Hudson and Arm is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Technologies and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc and Hudson Technologies 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 Hudson Technologies are associated (or correlated) with Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Hudson Technologies i.e., Hudson Technologies and Arm Holdings go up and down completely randomly.

Pair Corralation between Hudson Technologies and Arm Holdings

Given the investment horizon of 90 days Hudson Technologies is expected to generate 0.63 times more return on investment than Arm Holdings. However, Hudson Technologies is 1.59 times less risky than Arm Holdings. It trades about 0.0 of its potential returns per unit of risk. Arm Holdings plc is currently generating about 0.0 per unit of risk. If you would invest  588.00  in Hudson Technologies on October 7, 2024 and sell it today you would lose (3.00) from holding Hudson Technologies or give up 0.51% of portfolio value over 90 days.

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

Hudson Technologies  vs.  Arm Holdings plc

Hudson Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Arm Holdings plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Arm Holdings is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hudson Technologies and Arm Holdings

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

The idea behind Hudson Technologies and Arm Holdings plc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.