Correlation Between Ford and Hulamin

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

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

Diversification Opportunities for Ford and Hulamin

-0.17

Correlation Coefficient

Ford  Hulamin

Good diversification

The 3 months correlation between Ford and Hulamin is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hulamin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hulamin 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 Hulamin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hulamin has no effect on the direction of Ford i.e., Ford and Hulamin go up and down completely randomly.

Pair Corralation between Ford and Hulamin

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Hulamin. In addition to that, Ford is 1.05 times more volatile than Hulamin. It trades about -0.02 of its total potential returns per unit of risk. Hulamin is currently generating about 0.0 per unit of volatility. If you would invest  36,800  in Hulamin on September 14, 2024 and sell it today you would lose (1,800) from holding Hulamin or give up 4.89% of portfolio value over 90 days.

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

Ford Motor  vs.  Hulamin

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.

Hulamin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hulamin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ford and Hulamin

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

The idea behind Ford Motor and Hulamin 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.