Correlation Between Hydrotek Public and JD Food

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

By analyzing existing cross correlation between Hydrotek Public and JD Food PCL, you can compare the effects of market volatilities on Hydrotek Public and JD Food 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 JD Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hydrotek Public and JD Food.

Diversification Opportunities for Hydrotek Public and JD Food

0.05

Correlation Coefficient

Hydrotek Public  JD Food

Significant diversification

The 3 months correlation between Hydrotek and JDF is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hydrotek Public and JD Food PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Food PCL 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 JD Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Food PCL has no effect on the direction of Hydrotek Public i.e., Hydrotek Public and JD Food go up and down completely randomly.

Pair Corralation between Hydrotek Public and JD Food

Assuming the 90 days trading horizon Hydrotek Public is expected to generate 8.45 times more return on investment than JD Food. However, Hydrotek Public is 8.45 times more volatile than JD Food PCL. It trades about 0.13 of its potential returns per unit of risk. JD Food PCL is currently generating about -0.03 per unit of risk. If you would invest  88.00  in Hydrotek Public on December 30, 2024 and sell it today you would earn a total of  55.00  from holding Hydrotek Public or generate 62.5% return on investment over 90 days.

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

Hydrotek Public  vs.  JD Food PCL

Hydrotek Public

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hydrotek Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Hydrotek Public sustained solid returns over the last few months and may actually be approaching a breakup point.

JD Food PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days JD Food PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, JD Food is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Hydrotek Public and JD Food

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

The idea behind Hydrotek Public and JD Food PCL 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.