Correlation Between Hydrofarm Holdings and Arts Way

Can any of the company-specific risk be diversified away by investing in both Hydrofarm Holdings and Arts Way 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 Arts Way 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 Arts Way Manufacturing Co, you can compare the effects of market volatilities on Hydrofarm Holdings and Arts Way 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 Arts Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hydrofarm Holdings and Arts Way.

Diversification Opportunities for Hydrofarm Holdings and Arts Way

0.24

Correlation Coefficient

Hydrofarm Holdings  Arts Way

Modest diversification

The 3 months correlation between Hydrofarm and Arts is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Hydrofarm Holdings Group and Arts Way Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arts Way Manufacturing 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 Arts Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arts Way Manufacturing has no effect on the direction of Hydrofarm Holdings i.e., Hydrofarm Holdings and Arts Way go up and down completely randomly.

Pair Corralation between Hydrofarm Holdings and Arts Way

Given the investment horizon of 90 days Hydrofarm Holdings Group is expected to under-perform the Arts Way. But the stock apears to be less risky and, when comparing its historical volatility, Hydrofarm Holdings Group is 1.09 times less risky than Arts Way. The stock trades about -0.28 of its potential returns per unit of risk. The Arts Way Manufacturing Co is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  360.00  in Arts Way Manufacturing Co on December 29, 2024 and sell it today you would lose (197.00) from holding Arts Way Manufacturing Co or give up 54.72% of portfolio value over 90 days.

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

Hydrofarm Holdings Group  vs.  Arts Way Manufacturing Co

Hydrofarm Holdings

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Arts Way Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arts Way Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Hydrofarm Holdings and Arts Way

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

The idea behind Hydrofarm Holdings Group and Arts Way Manufacturing Co 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.