Correlation Between Penta Ocean and HYDROFARM HLD

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

By analyzing existing cross correlation between Penta Ocean Construction Co and HYDROFARM HLD GRP, you can compare the effects of market volatilities on Penta Ocean and HYDROFARM HLD 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 Penta Ocean with a short position of HYDROFARM HLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta Ocean and HYDROFARM HLD.

Diversification Opportunities for Penta Ocean and HYDROFARM HLD

0.32

Correlation Coefficient

Penta Ocean  HYDROFARM HLD

Weak diversification

The 3 months correlation between Penta and HYDROFARM is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and HYDROFARM HLD GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYDROFARM HLD GRP and Penta Ocean 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 Penta Ocean Construction Co are associated (or correlated) with HYDROFARM HLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYDROFARM HLD GRP has no effect on the direction of Penta Ocean i.e., Penta Ocean and HYDROFARM HLD go up and down completely randomly.

Pair Corralation between Penta Ocean and HYDROFARM HLD

Assuming the 90 days horizon Penta Ocean is expected to generate 4.34 times less return on investment than HYDROFARM HLD. But when comparing it to its historical volatility, Penta Ocean Construction Co is 2.79 times less risky than HYDROFARM HLD. It trades about 0.02 of its potential returns per unit of risk. HYDROFARM HLD GRP is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  61.00  in HYDROFARM HLD GRP on September 16, 2024 and sell it today you would earn a total of  3.00  from holding HYDROFARM HLD GRP or generate 4.92% return on investment over 90 days.

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

Penta Ocean Construction Co  vs.  HYDROFARM HLD GRP

Penta Ocean Construc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Penta Ocean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

HYDROFARM HLD GRP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HYDROFARM HLD GRP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HYDROFARM HLD may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Penta Ocean and HYDROFARM HLD

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

The idea behind Penta Ocean Construction Co and HYDROFARM HLD GRP 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.