Correlation Between Ford and HAVERTY FURNITURE

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

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

Diversification Opportunities for Ford and HAVERTY FURNITURE

0.23

Correlation Coefficient

Ford  HAVERTY FURNITURE

Modest diversification

The 3 months correlation between Ford and HAVERTY is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and HAVERTY FURNITURE A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HAVERTY FURNITURE 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 HAVERTY FURNITURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HAVERTY FURNITURE has no effect on the direction of Ford i.e., Ford and HAVERTY FURNITURE go up and down completely randomly.

Pair Corralation between Ford and HAVERTY FURNITURE

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.96 times more return on investment than HAVERTY FURNITURE. However, Ford Motor is 1.04 times less risky than HAVERTY FURNITURE. It trades about -0.01 of its potential returns per unit of risk. HAVERTY FURNITURE A is currently generating about -0.02 per unit of risk. If you would invest  1,211  in Ford Motor on October 24, 2024 and sell it today you would lose (208.00) from holding Ford Motor or give up 17.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.8%
Values	Daily Returns

Ford Motor  vs.  HAVERTY FURNITURE A

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

HAVERTY FURNITURE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HAVERTY FURNITURE A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ford and HAVERTY FURNITURE

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

The idea behind Ford Motor and HAVERTY FURNITURE A 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .