Correlation Between Hydrofarm Holdings and AGCO

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

By analyzing existing cross correlation between Hydrofarm Holdings Group and AGCO Corporation, you can compare the effects of market volatilities on Hydrofarm Holdings and AGCO 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 Hydrofarm Holdings with a short position of AGCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hydrofarm Holdings and AGCO.

Diversification Opportunities for Hydrofarm Holdings and AGCO

0.61

Correlation Coefficient

Hydrofarm Holdings  AGCO

Poor diversification

The 3 months correlation between Hydrofarm and AGCO is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hydrofarm Holdings Group and AGCO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGCO and Hydrofarm Holdings 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 Hydrofarm Holdings Group are associated (or correlated) with AGCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGCO has no effect on the direction of Hydrofarm Holdings i.e., Hydrofarm Holdings and AGCO go up and down completely randomly.

Pair Corralation between Hydrofarm Holdings and AGCO

Given the investment horizon of 90 days Hydrofarm Holdings Group is expected to generate 3.11 times more return on investment than AGCO. However, Hydrofarm Holdings is 3.11 times more volatile than AGCO Corporation. It trades about 0.24 of its potential returns per unit of risk. AGCO Corporation is currently generating about 0.09 per unit of risk. If you would invest  53.00  in Hydrofarm Holdings Group on September 16, 2024 and sell it today you would earn a total of  17.00  from holding Hydrofarm Holdings Group or generate 32.08% return on investment over 90 days.

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

Hydrofarm Holdings Group  vs.  AGCO Corp.

Hydrofarm Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hydrofarm Holdings Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Hydrofarm Holdings is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

AGCO

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AGCO Corporation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, AGCO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hydrofarm Holdings and AGCO

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

The idea behind Hydrofarm Holdings Group and AGCO Corporation 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.