Correlation Between Ford and Baron Health

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

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

Diversification Opportunities for Ford and Baron Health

0.77

Correlation Coefficient

Ford  Baron Health

Poor diversification

The 3 months correlation between Ford and Baron is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Baron Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Health Care 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 Baron Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Health Care has no effect on the direction of Ford i.e., Ford and Baron Health go up and down completely randomly.

Pair Corralation between Ford and Baron Health

Taking into account the 90-day investment horizon Ford is expected to generate 3.07 times less return on investment than Baron Health. In addition to that, Ford is 1.91 times more volatile than Baron Health Care. It trades about 0.04 of its total potential returns per unit of risk. Baron Health Care is currently generating about 0.22 per unit of volatility. If you would invest  1,963  in Baron Health Care on October 26, 2024 and sell it today you would earn a total of  68.00  from holding Baron Health Care or generate 3.46% return on investment over 90 days.

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

Ford Motor  vs.  Baron Health Care

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.

Baron Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Baron Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Baron Health

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

The idea behind Ford Motor and Baron Health Care 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.