Correlation Between Hydratec Industries and Alumexx NV

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

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

Diversification Opportunities for Hydratec Industries and Alumexx NV

0.36

Correlation Coefficient

Hydratec Industries  Alumexx NV

Weak diversification

The 3 months correlation between Hydratec and Alumexx is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hydratec Industries NV and Alumexx NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumexx NV and Hydratec Industries 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 Hydratec Industries NV are associated (or correlated) with Alumexx NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumexx NV has no effect on the direction of Hydratec Industries i.e., Hydratec Industries and Alumexx NV go up and down completely randomly.

Pair Corralation between Hydratec Industries and Alumexx NV

Assuming the 90 days trading horizon Hydratec Industries is expected to generate 68.14 times less return on investment than Alumexx NV. But when comparing it to its historical volatility, Hydratec Industries NV is 4.22 times less risky than Alumexx NV. It trades about 0.0 of its potential returns per unit of risk. Alumexx NV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  127.00  in Alumexx NV on September 17, 2024 and sell it today you would earn a total of  3.00  from holding Alumexx NV or generate 2.36% return on investment over 90 days.

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

Hydratec Industries NV  vs.  Alumexx NV

Hydratec Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hydratec Industries NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hydratec Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Alumexx NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alumexx NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alumexx NV may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hydratec Industries and Alumexx NV

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

The idea behind Hydratec Industries NV and Alumexx NV 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.