Correlation Between Hydrofarm Holdings and Ideanomics

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

Diversification Opportunities for Hydrofarm Holdings and Ideanomics

0.42

Correlation Coefficient

Hydrofarm Holdings  Ideanomics

Very weak diversification

The 3 months correlation between Hydrofarm and Ideanomics is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hydrofarm Holdings Group and Ideanomics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideanomics 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 Ideanomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideanomics has no effect on the direction of Hydrofarm Holdings i.e., Hydrofarm Holdings and Ideanomics go up and down completely randomly.

Pair Corralation between Hydrofarm Holdings and Ideanomics

Given the investment horizon of 90 days Hydrofarm Holdings is expected to generate 6.36 times less return on investment than Ideanomics. But when comparing it to its historical volatility, Hydrofarm Holdings Group is 8.3 times less risky than Ideanomics. It trades about 0.13 of its potential returns per unit of risk. Ideanomics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Ideanomics on September 19, 2024 and sell it today you would lose (5.49) from holding Ideanomics or give up 91.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Hydrofarm Holdings Group  vs.  Ideanomics

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 very healthy technical and fundamental indicators, Hydrofarm Holdings is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Ideanomics

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Hydrofarm Holdings and Ideanomics

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

The idea behind Hydrofarm Holdings Group and Ideanomics 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..