Correlation Between Hino Motors and Hydrofarm Holdings

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

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

Diversification Opportunities for Hino Motors and Hydrofarm Holdings

0.33

Correlation Coefficient

Hino Motors  Hydrofarm Holdings

Weak diversification

The 3 months correlation between Hino and Hydrofarm is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hino Motors Ltd and Hydrofarm Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydrofarm Holdings and Hino Motors 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 Hino Motors Ltd are associated (or correlated) with Hydrofarm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hydrofarm Holdings has no effect on the direction of Hino Motors i.e., Hino Motors and Hydrofarm Holdings go up and down completely randomly.

Pair Corralation between Hino Motors and Hydrofarm Holdings

Assuming the 90 days horizon Hino Motors Ltd is expected to under-perform the Hydrofarm Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hino Motors Ltd is 1.54 times less risky than Hydrofarm Holdings. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Hydrofarm Holdings Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  72.00  in Hydrofarm Holdings Group on September 16, 2024 and sell it today you would lose (2.00) from holding Hydrofarm Holdings Group or give up 2.78% of portfolio value over 90 days.

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

Hino Motors Ltd  vs.  Hydrofarm Holdings Group

Hino Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hino Motors Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hydrofarm Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hydrofarm Holdings Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Hydrofarm Holdings is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hino Motors and Hydrofarm Holdings

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

The idea behind Hino Motors Ltd and Hydrofarm Holdings Group 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..