Correlation Between Ford and Hess Midstream

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

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

Diversification Opportunities for Ford and Hess Midstream

0.29

Correlation Coefficient

Ford  Hess Midstream

Modest diversification

The 3 months correlation between Ford and Hess is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hess Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess Midstream Partners 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 Hess Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess Midstream Partners has no effect on the direction of Ford i.e., Ford and Hess Midstream go up and down completely randomly.

Pair Corralation between Ford and Hess Midstream

Taking into account the 90-day investment horizon Ford is expected to generate 2.87 times less return on investment than Hess Midstream. In addition to that, Ford is 1.29 times more volatile than Hess Midstream Partners. It trades about 0.05 of its total potential returns per unit of risk. Hess Midstream Partners is currently generating about 0.2 per unit of volatility. If you would invest  3,576  in Hess Midstream Partners on December 26, 2024 and sell it today you would earn a total of  715.00  from holding Hess Midstream Partners or generate 19.99% return on investment over 90 days.

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

Ford Motor  vs.  Hess Midstream Partners

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hess Midstream Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Midstream Partners are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Hess Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Hess Midstream

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

The idea behind Ford Motor and Hess Midstream Partners 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.