Correlation Between Hudson Technologies and CompX International

Can any of the company-specific risk be diversified away by investing in both Hudson Technologies and CompX International 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 Hudson Technologies and CompX International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hudson Technologies and CompX International, you can compare the effects of market volatilities on Hudson Technologies and CompX International 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 Hudson Technologies with a short position of CompX International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hudson Technologies and CompX International.

Diversification Opportunities for Hudson Technologies and CompX International

-0.76

Correlation Coefficient

Hudson Technologies  CompX International

Pay attention - limited upside

The 3 months correlation between Hudson and CompX is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Technologies and CompX International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompX International and Hudson Technologies 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 Hudson Technologies are associated (or correlated) with CompX International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompX International has no effect on the direction of Hudson Technologies i.e., Hudson Technologies and CompX International go up and down completely randomly.

Pair Corralation between Hudson Technologies and CompX International

Given the investment horizon of 90 days Hudson Technologies is expected to under-perform the CompX International. But the stock apears to be less risky and, when comparing its historical volatility, Hudson Technologies is 1.85 times less risky than CompX International. The stock trades about -0.2 of its potential returns per unit of risk. The CompX International is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,228  in CompX International on January 30, 2024 and sell it today you would earn a total of  199.00  from holding CompX International or generate 6.16% return on investment over 90 days.

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

Hudson Technologies  vs.  CompX International

Hudson Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hudson Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

CompX International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CompX International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, CompX International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hudson Technologies and CompX International

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

The idea behind Hudson Technologies and CompX International 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.