Correlation Between Ford and Hengkang Medical

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

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

Diversification Opportunities for Ford and Hengkang Medical

0.03

Correlation Coefficient

Ford  Hengkang Medical

Significant diversification

The 3 months correlation between Ford and Hengkang is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hengkang Medical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengkang Medical and Ford 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 Ford Motor are associated (or correlated) with Hengkang Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengkang Medical has no effect on the direction of Ford i.e., Ford and Hengkang Medical go up and down completely randomly.

Pair Corralation between Ford and Hengkang Medical

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Hengkang Medical. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 2.11 times less risky than Hengkang Medical. The stock trades about -0.11 of its potential returns per unit of risk. The Hengkang Medical Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  270.00  in Hengkang Medical Group on November 29, 2024 and sell it today you would earn a total of  12.00  from holding Hengkang Medical Group or generate 4.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

Ford Motor  vs.  Hengkang Medical Group

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hengkang Medical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hengkang Medical Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengkang Medical may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Ford and Hengkang Medical

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

The idea behind Ford Motor and Hengkang Medical Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.