Correlation Between Ford and Fuh Hwa

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

By analyzing existing cross correlation between Ford Motor and Fuh Hwa FTSE, you can compare the effects of market volatilities on Ford and Fuh Hwa 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 Fuh Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Fuh Hwa.

Diversification Opportunities for Ford and Fuh Hwa

0.02

Correlation Coefficient

Ford  Fuh Hwa

Significant diversification

The 3 months correlation between Ford and Fuh is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fuh Hwa FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuh Hwa FTSE 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 Fuh Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuh Hwa FTSE has no effect on the direction of Ford i.e., Ford and Fuh Hwa go up and down completely randomly.

Pair Corralation between Ford and Fuh Hwa

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Fuh Hwa. In addition to that, Ford is 2.94 times more volatile than Fuh Hwa FTSE. It trades about -0.01 of its total potential returns per unit of risk. Fuh Hwa FTSE is currently generating about -0.02 per unit of volatility. If you would invest  991.00  in Fuh Hwa FTSE on September 14, 2024 and sell it today you would lose (9.00) from holding Fuh Hwa FTSE or give up 0.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Ford Motor  vs.  Fuh Hwa FTSE

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Fuh Hwa FTSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fuh Hwa FTSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fuh Hwa is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Fuh Hwa

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

The idea behind Ford Motor and Fuh Hwa FTSE 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.