Correlation Between Hudson Technologies and KAR Auction

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

By analyzing existing cross correlation between Hudson Technologies and KAR Auction Services, you can compare the effects of market volatilities on Hudson Technologies and KAR Auction 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 KAR Auction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hudson Technologies and KAR Auction.

Diversification Opportunities for Hudson Technologies and KAR Auction

0.0

Correlation Coefficient

Hudson Technologies  KAR Auction

Pay attention - limited upside

The 3 months correlation between Hudson and KAR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Technologies and KAR Auction Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAR Auction Services 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 KAR Auction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAR Auction Services has no effect on the direction of Hudson Technologies i.e., Hudson Technologies and KAR Auction go up and down completely randomly.

Pair Corralation between Hudson Technologies and KAR Auction

Given the investment horizon of 90 days Hudson Technologies is expected to generate 1.13 times more return on investment than KAR Auction. However, Hudson Technologies is 1.13 times more volatile than KAR Auction Services. It trades about 0.12 of its potential returns per unit of risk. KAR Auction Services is currently generating about 0.01 per unit of risk. If you would invest  530.00  in Hudson Technologies on December 19, 2024 and sell it today you would earn a total of  72.00  from holding Hudson Technologies or generate 13.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hudson Technologies  vs.  KAR Auction Services

Hudson Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Hudson Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

KAR Auction Services

Risk-Adjusted Performance

Weak

Over the last 90 days KAR Auction Services has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, KAR Auction is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Hudson Technologies and KAR Auction

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

The idea behind Hudson Technologies and KAR Auction Services 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..