Correlation Between Hydrofarm Holdings and Gencor Industries

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

Diversification Opportunities for Hydrofarm Holdings and Gencor Industries

0.65

Correlation Coefficient

Hydrofarm Holdings  Gencor Industries

Poor diversification

The 3 months correlation between Hydrofarm and Gencor is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hydrofarm Holdings Group and Gencor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gencor Industries 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 Gencor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gencor Industries has no effect on the direction of Hydrofarm Holdings i.e., Hydrofarm Holdings and Gencor Industries go up and down completely randomly.

Pair Corralation between Hydrofarm Holdings and Gencor Industries

Given the investment horizon of 90 days Hydrofarm Holdings Group is expected to under-perform the Gencor Industries. In addition to that, Hydrofarm Holdings is 1.86 times more volatile than Gencor Industries. It trades about -0.28 of its total potential returns per unit of risk. Gencor Industries is currently generating about -0.16 per unit of volatility. If you would invest  1,722  in Gencor Industries on December 30, 2024 and sell it today you would lose (466.00) from holding Gencor Industries or give up 27.06% of portfolio value over 90 days.

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

Hydrofarm Holdings Group  vs.  Gencor Industries

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.

Gencor Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gencor Industries 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 rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Hydrofarm Holdings and Gencor Industries

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

The idea behind Hydrofarm Holdings Group and Gencor Industries 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.