Correlation Between Ford and Heartland Value

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

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

Diversification Opportunities for Ford and Heartland Value

0.69

Correlation Coefficient

Ford  Heartland Value

Poor diversification

The 3 months correlation between Ford and Heartland is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Heartland Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Value 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 Heartland Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Value has no effect on the direction of Ford i.e., Ford and Heartland Value go up and down completely randomly.

Pair Corralation between Ford and Heartland Value

Taking into account the 90-day investment horizon Ford is expected to generate 3.26 times less return on investment than Heartland Value. In addition to that, Ford is 1.82 times more volatile than Heartland Value Fund. It trades about 0.03 of its total potential returns per unit of risk. Heartland Value Fund is currently generating about 0.19 per unit of volatility. If you would invest  4,938  in Heartland Value Fund on September 2, 2024 and sell it today you would earn a total of  669.00  from holding Heartland Value Fund or generate 13.55% return on investment over 90 days.

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

Ford Motor  vs.  Heartland Value Fund

Ford Motor

Risk-Adjusted Performance

2 of 100

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.

Heartland Value

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Value Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Heartland Value showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Heartland Value

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

The idea behind Ford Motor and Heartland Value Fund 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.