Correlation Between Hydratec Industries and Kendrion

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

Diversification Opportunities for Hydratec Industries and Kendrion

-0.7

Correlation Coefficient

Hydratec Industries  Kendrion

Excellent diversification

The 3 months correlation between Hydratec and Kendrion is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hydratec Industries NV and Kendrion NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kendrion 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 Kendrion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kendrion NV has no effect on the direction of Hydratec Industries i.e., Hydratec Industries and Kendrion go up and down completely randomly.

Pair Corralation between Hydratec Industries and Kendrion

Assuming the 90 days trading horizon Hydratec Industries NV is expected to generate 0.4 times more return on investment than Kendrion. However, Hydratec Industries NV is 2.52 times less risky than Kendrion. It trades about 0.0 of its potential returns per unit of risk. Kendrion NV is currently generating about -0.05 per unit of risk. If you would invest  16,000  in Hydratec Industries NV on September 16, 2024 and sell it today you would earn a total of  0.00  from holding Hydratec Industries NV or generate 0.0% return on investment over 90 days.

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

Hydratec Industries NV  vs.  Kendrion 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 uncertain basic indicators, Hydratec Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Kendrion NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kendrion NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite 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.

Pair Trading with Hydratec Industries and Kendrion

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

The idea behind Hydratec Industries NV and Kendrion 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.