Correlation Between TKH Group and Hydratec Industries

Can any of the company-specific risk be diversified away by investing in both TKH Group and Hydratec 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 TKH Group and Hydratec Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TKH Group NV and Hydratec Industries NV, you can compare the effects of market volatilities on TKH Group and Hydratec 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 TKH Group with a short position of Hydratec Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of TKH Group and Hydratec Industries.

Diversification Opportunities for TKH Group and Hydratec Industries

-0.43

Correlation Coefficient

TKH Group  Hydratec Industries

Very good diversification

The 3 months correlation between TKH and Hydratec is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding TKH Group NV and Hydratec Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydratec Industries and TKH Group 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 TKH Group NV are associated (or correlated) with Hydratec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hydratec Industries has no effect on the direction of TKH Group i.e., TKH Group and Hydratec Industries go up and down completely randomly.

Pair Corralation between TKH Group and Hydratec Industries

Assuming the 90 days trading horizon TKH Group NV is expected to under-perform the Hydratec Industries. But the stock apears to be less risky and, when comparing its historical volatility, TKH Group NV is 1.42 times less risky than Hydratec Industries. The stock trades about -0.15 of its potential returns per unit of risk. The Hydratec Industries NV is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  14,000  in Hydratec Industries NV on September 13, 2024 and sell it today you would earn a total of  1,800  from holding Hydratec Industries NV or generate 12.86% return on investment over 90 days.

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

TKH Group NV  vs.  Hydratec Industries NV

TKH Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TKH Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hydratec Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hydratec Industries NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hydratec Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TKH Group and Hydratec Industries

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

The idea behind TKH Group NV and Hydratec Industries NV 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.