Correlation Between Hydrotek Public and Harn Engineering

Can any of the company-specific risk be diversified away by investing in both Hydrotek Public and Harn Engineering 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 Hydrotek Public and Harn Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hydrotek Public and Harn Engineering Solutions, you can compare the effects of market volatilities on Hydrotek Public and Harn Engineering 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 Hydrotek Public with a short position of Harn Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hydrotek Public and Harn Engineering.

Diversification Opportunities for Hydrotek Public and Harn Engineering

0.39

Correlation Coefficient

Hydrotek Public  Harn Engineering

Weak diversification

The 3 months correlation between Hydrotek and Harn is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hydrotek Public and Harn Engineering Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harn Engineering Sol and Hydrotek Public 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 Hydrotek Public are associated (or correlated) with Harn Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harn Engineering Sol has no effect on the direction of Hydrotek Public i.e., Hydrotek Public and Harn Engineering go up and down completely randomly.

Pair Corralation between Hydrotek Public and Harn Engineering

Assuming the 90 days trading horizon Hydrotek Public is expected to generate 9.11 times more return on investment than Harn Engineering. However, Hydrotek Public is 9.11 times more volatile than Harn Engineering Solutions. It trades about 0.09 of its potential returns per unit of risk. Harn Engineering Solutions is currently generating about 0.05 per unit of risk. If you would invest  11.00  in Hydrotek Public on September 17, 2024 and sell it today you would earn a total of  1.00  from holding Hydrotek Public or generate 9.09% return on investment over 90 days.

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

Hydrotek Public  vs.  Harn Engineering Solutions

Hydrotek Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hydrotek Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Harn Engineering Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harn Engineering Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Harn Engineering is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Hydrotek Public and Harn Engineering

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

The idea behind Hydrotek Public and Harn Engineering Solutions 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.