Correlation Between Hydrofarm Holdings and CNH Industrial

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

Diversification Opportunities for Hydrofarm Holdings and CNH Industrial

0.05

Correlation Coefficient

Hydrofarm Holdings  CNH Industrial

Significant diversification

The 3 months correlation between Hydrofarm and CNH is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hydrofarm Holdings Group and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV 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 CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of Hydrofarm Holdings i.e., Hydrofarm Holdings and CNH Industrial go up and down completely randomly.

Pair Corralation between Hydrofarm Holdings and CNH Industrial

If you would invest  54.00  in Hydrofarm Holdings Group on June 9, 2024 and sell it today you would earn a total of  7.00  from holding Hydrofarm Holdings Group or generate 12.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Hydrofarm Holdings Group  vs.  CNH Industrial NV

Hydrofarm Holdings

Risk-Adjusted Performance

0 of 100

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 October 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

CNH Industrial NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNH Industrial NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, CNH Industrial is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Hydrofarm Holdings and CNH Industrial

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

The idea behind Hydrofarm Holdings Group and CNH Industrial 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.