Correlation Between Ford and Herbalife Nutrition

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

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

Diversification Opportunities for Ford and Herbalife Nutrition

0.38

Correlation Coefficient

Ford  Herbalife Nutrition

Weak diversification

The 3 months correlation between Ford and Herbalife is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Herbalife Nutrition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herbalife Nutrition 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 Herbalife Nutrition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herbalife Nutrition has no effect on the direction of Ford i.e., Ford and Herbalife Nutrition go up and down completely randomly.

Pair Corralation between Ford and Herbalife Nutrition

Taking into account the 90-day investment horizon Ford is expected to generate 7.47 times less return on investment than Herbalife Nutrition. But when comparing it to its historical volatility, Ford Motor is 3.06 times less risky than Herbalife Nutrition. It trades about 0.04 of its potential returns per unit of risk. Herbalife Nutrition is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  672.00  in Herbalife Nutrition on December 28, 2024 and sell it today you would earn a total of  190.00  from holding Herbalife Nutrition or generate 28.27% 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.  Herbalife Nutrition

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Herbalife Nutrition

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Herbalife Nutrition are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Herbalife Nutrition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Herbalife Nutrition

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

The idea behind Ford Motor and Herbalife Nutrition 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.