Correlation Between Ford and Harum Energy

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

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

Diversification Opportunities for Ford and Harum Energy

0.78

Correlation Coefficient

Ford  Harum Energy

Poor diversification

The 3 months correlation between Ford and Harum is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Harum Energy Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harum Energy Tbk 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 Harum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harum Energy Tbk has no effect on the direction of Ford i.e., Ford and Harum Energy go up and down completely randomly.

Pair Corralation between Ford and Harum Energy

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.92 times more return on investment than Harum Energy. However, Ford Motor is 1.09 times less risky than Harum Energy. It trades about -0.1 of its potential returns per unit of risk. Harum Energy Tbk is currently generating about -0.27 per unit of risk. If you would invest  1,073  in Ford Motor on November 20, 2024 and sell it today you would lose (125.00) from holding Ford Motor or give up 11.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.92%
Values	Daily Returns

Ford Motor  vs.  Harum Energy Tbk

Ford Motor

Risk-Adjusted Performance

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.

Harum Energy Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harum Energy Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Ford and Harum Energy

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

The idea behind Ford Motor and Harum Energy Tbk 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.