Correlation Between Lion Electric and Hydrofarm Holdings

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

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

Diversification Opportunities for Lion Electric and Hydrofarm Holdings

0.0

Correlation Coefficient

Lion Electric  Hydrofarm Holdings

Pay attention - limited upside

The 3 months correlation between Lion and Hydrofarm is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lion Electric Corp and Hydrofarm Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydrofarm Holdings and Lion Electric 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 Lion Electric Corp are associated (or correlated) with Hydrofarm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hydrofarm Holdings has no effect on the direction of Lion Electric i.e., Lion Electric and Hydrofarm Holdings go up and down completely randomly.

Pair Corralation between Lion Electric and Hydrofarm Holdings

If you would invest (100.00) in Lion Electric Corp on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Lion Electric Corp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Lion Electric Corp  vs.  Hydrofarm Holdings Group

Lion Electric Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lion Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Lion Electric is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Lion Electric and Hydrofarm Holdings

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

The idea behind Lion Electric Corp and Hydrofarm Holdings Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.