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 Small, 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

0.78

Correlation Coefficient

Ford  Hotchkis Wiley

Poor diversification

The 3 months correlation between Ford and Hotchkis is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hotchkis Wiley Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotchkis Wiley Small 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 Small 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 Motor is expected to generate 1.19 times more return on investment than Hotchkis Wiley. However, Ford is 1.19 times more volatile than Hotchkis Wiley Small. It trades about -0.09 of its potential returns per unit of risk. Hotchkis Wiley Small is currently generating about -0.19 per unit of risk. If you would invest  1,063  in Ford Motor on December 1, 2024 and sell it today you would lose (108.00) from holding Ford Motor or give up 10.16% of portfolio value over 90 days.

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

Ford Motor  vs.  Hotchkis Wiley Small

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.

Hotchkis Wiley Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hotchkis Wiley Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund 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 Small 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .