Correlation Between Hudson Technologies and Service Properties

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

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

Diversification Opportunities for Hudson Technologies and Service Properties

0.16

Correlation Coefficient

Hudson Technologies  Service Properties

Average diversification

The 3 months correlation between Hudson and Service is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Technologies and Service Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service Properties Trust 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 Service Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service Properties Trust has no effect on the direction of Hudson Technologies i.e., Hudson Technologies and Service Properties go up and down completely randomly.

Pair Corralation between Hudson Technologies and Service Properties

Given the investment horizon of 90 days Hudson Technologies is expected to generate 1.17 times less return on investment than Service Properties. But when comparing it to its historical volatility, Hudson Technologies is 2.16 times less risky than Service Properties. It trades about 0.13 of its potential returns per unit of risk. Service Properties Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  244.00  in Service Properties Trust on December 28, 2024 and sell it today you would earn a total of  33.00  from holding Service Properties Trust or generate 13.52% return on investment over 90 days.

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

Hudson Technologies  vs.  Service Properties Trust

Hudson Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Technologies are ranked lower than 10 (%) 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.

Service Properties Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Service Properties Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Service Properties exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hudson Technologies and Service Properties

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

The idea behind Hudson Technologies and Service Properties Trust 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.