Correlation Between Fastned BV and Hydratec Industries

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

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

Diversification Opportunities for Fastned BV and Hydratec Industries

0.24

Correlation Coefficient

Fastned BV  Hydratec Industries

Modest diversification

The 3 months correlation between Fastned and Hydratec is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fastned BV and Hydratec Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hydratec Industries and Fastned BV 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 Fastned BV 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 Fastned BV i.e., Fastned BV and Hydratec Industries go up and down completely randomly.

Pair Corralation between Fastned BV and Hydratec Industries

Assuming the 90 days trading horizon Fastned BV is expected to generate 0.92 times more return on investment than Hydratec Industries. However, Fastned BV is 1.09 times less risky than Hydratec Industries. It trades about 0.47 of its potential returns per unit of risk. Hydratec Industries NV is currently generating about 0.07 per unit of risk. If you would invest  1,566  in Fastned BV on July 2, 2024 and sell it today you would earn a total of  534.00  from holding Fastned BV or generate 34.1% return on investment over 90 days.

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

Fastned BV  vs.  Hydratec Industries NV

Fastned BV

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fastned BV are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Fastned BV unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hydratec Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hydratec Industries NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Hydratec Industries may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with Fastned BV and Hydratec Industries

The main advantage of trading using opposite Fastned BV and Hydratec Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fastned BV 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 Fastned BV 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.