Correlation Between Ford and Hotchkis Wiley

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

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

Diversification Opportunities for Ford and Hotchkis Wiley

0.61

Correlation Coefficient

Ford  Hotchkis Wiley

Poor diversification

The 3 months correlation between Ford and Hotchkis is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hotchkis Wiley Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotchkis Wiley Large 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 Hotchkis Wiley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotchkis Wiley Large has no effect on the direction of Ford i.e., Ford and Hotchkis Wiley go up and down completely randomly.

Pair Corralation between Ford and Hotchkis Wiley

Taking into account the 90-day investment horizon Ford is expected to generate 1.56 times less return on investment than Hotchkis Wiley. In addition to that, Ford is 2.43 times more volatile than Hotchkis Wiley Large. It trades about 0.03 of its total potential returns per unit of risk. Hotchkis Wiley Large is currently generating about 0.12 per unit of volatility. If you would invest  4,545  in Hotchkis Wiley Large on September 3, 2024 and sell it today you would earn a total of  284.00  from holding Hotchkis Wiley Large or generate 6.25% 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.  Hotchkis Wiley Large

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Hotchkis Wiley Large

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hotchkis Wiley Large are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Hotchkis Wiley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Hotchkis Wiley

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

The idea behind Ford Motor and Hotchkis Wiley Large 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.