Correlation Between Hydrofarm Holdings and Deere

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

Diversification Opportunities for Hydrofarm Holdings and Deere

-0.41

Correlation Coefficient

Hydrofarm Holdings  Deere

Very good diversification

The 3 months correlation between Hydrofarm and Deere is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hydrofarm Holdings Group and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company 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 Deere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deere Company has no effect on the direction of Hydrofarm Holdings i.e., Hydrofarm Holdings and Deere go up and down completely randomly.

Pair Corralation between Hydrofarm Holdings and Deere

Given the investment horizon of 90 days Hydrofarm Holdings Group is expected to under-perform the Deere. In addition to that, Hydrofarm Holdings is 3.07 times more volatile than Deere Company. It trades about -0.28 of its total potential returns per unit of risk. Deere Company is currently generating about 0.12 per unit of volatility. If you would invest  42,302  in Deere Company on December 29, 2024 and sell it today you would earn a total of  5,670  from holding Deere Company or generate 13.4% return on investment over 90 days.

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

Hydrofarm Holdings Group  vs.  Deere Company

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.

Deere Company

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Deere exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hydrofarm Holdings and Deere

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

The idea behind Hydrofarm Holdings Group and Deere Company 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.