Correlation Between Ford and Harford Bank

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

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

Diversification Opportunities for Ford and Harford Bank

0.37

Correlation Coefficient

Ford  Harford Bank

Weak diversification

The 3 months correlation between Ford and Harford is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Harford Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harford Bank 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 Harford Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harford Bank has no effect on the direction of Ford i.e., Ford and Harford Bank go up and down completely randomly.

Pair Corralation between Ford and Harford Bank

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Harford Bank. In addition to that, Ford is 3.24 times more volatile than Harford Bank. It trades about -0.32 of its total potential returns per unit of risk. Harford Bank is currently generating about -0.17 per unit of volatility. If you would invest  3,442  in Harford Bank on September 20, 2024 and sell it today you would lose (67.00) from holding Harford Bank or give up 1.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Harford Bank

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.

Harford Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harford Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Harford Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ford and Harford Bank

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

The idea behind Ford Motor and Harford Bank 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.