Correlation Between Ford and Healthier Choices

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

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

Diversification Opportunities for Ford and Healthier Choices

0.07

Correlation Coefficient

Ford  Healthier Choices

Significant diversification

The 3 months correlation between Ford and Healthier is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Healthier Choices Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthier Choices 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 Healthier Choices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthier Choices has no effect on the direction of Ford i.e., Ford and Healthier Choices go up and down completely randomly.

Pair Corralation between Ford and Healthier Choices

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Healthier Choices. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 151.24 times less risky than Healthier Choices. The stock trades about -0.1 of its potential returns per unit of risk. The Healthier Choices Management is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Healthier Choices Management on November 20, 2024 and sell it today you would earn a total of  0.00  from holding Healthier Choices Management or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Ford Motor  vs.  Healthier Choices Management

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 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.

Healthier Choices

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Healthier Choices Management are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Healthier Choices exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Healthier Choices

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

The idea behind Ford Motor and Healthier Choices Management 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.