Correlation Between Ford and Hargreaves Lansdown

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

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

Diversification Opportunities for Ford and Hargreaves Lansdown

-0.15

Correlation Coefficient

Ford  Hargreaves Lansdown

Good diversification

The 3 months correlation between Ford and Hargreaves is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hargreaves Lansdown plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hargreaves Lansdown plc 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 Hargreaves Lansdown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hargreaves Lansdown plc has no effect on the direction of Ford i.e., Ford and Hargreaves Lansdown go up and down completely randomly.

Pair Corralation between Ford and Hargreaves Lansdown

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Hargreaves Lansdown. In addition to that, Ford is 4.1 times more volatile than Hargreaves Lansdown plc. It trades about -0.05 of its total potential returns per unit of risk. Hargreaves Lansdown plc is currently generating about 0.0 per unit of volatility. If you would invest  109,660  in Hargreaves Lansdown plc on September 27, 2024 and sell it today you would earn a total of  40.00  from holding Hargreaves Lansdown plc or generate 0.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Ford Motor  vs.  Hargreaves Lansdown plc

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 nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Hargreaves Lansdown plc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hargreaves Lansdown plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Hargreaves Lansdown is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and Hargreaves Lansdown

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

The idea behind Ford Motor and Hargreaves Lansdown plc 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.