Correlation Between Hydratec Industries and IShares SP

Can any of the company-specific risk be diversified away by investing in both Hydratec Industries and IShares SP 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 IShares SP 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 iShares SP 500, you can compare the effects of market volatilities on Hydratec Industries and IShares SP 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 IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hydratec Industries and IShares SP.

Diversification Opportunities for Hydratec Industries and IShares SP

0.69

Correlation Coefficient

Hydratec Industries  IShares SP

Poor diversification

The 3 months correlation between Hydratec and IShares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hydratec Industries NV and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 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 IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Hydratec Industries i.e., Hydratec Industries and IShares SP go up and down completely randomly.

Pair Corralation between Hydratec Industries and IShares SP

Assuming the 90 days trading horizon Hydratec Industries NV is expected to generate 3.07 times more return on investment than IShares SP. However, Hydratec Industries is 3.07 times more volatile than iShares SP 500. It trades about 0.1 of its potential returns per unit of risk. iShares SP 500 is currently generating about 0.28 per unit of risk. If you would invest  13,900  in Hydratec Industries NV on September 12, 2024 and sell it today you would earn a total of  2,100  from holding Hydratec Industries NV or generate 15.11% return on investment over 90 days.

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

Hydratec Industries NV  vs.  iShares SP 500

Hydratec Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hydratec Industries NV are ranked lower than 8 (%) 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.

iShares SP 500

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares SP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hydratec Industries and IShares SP

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

The idea behind Hydratec Industries NV and iShares SP 500 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.