Correlation Between Ford and Harvest Eli

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

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

Diversification Opportunities for Ford and Harvest Eli

-0.24

Correlation Coefficient

Ford  Harvest Eli

Very good diversification

The 3 months correlation between Ford and Harvest is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Harvest Eli Lilly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Eli Lilly 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 Harvest Eli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Eli Lilly has no effect on the direction of Ford i.e., Ford and Harvest Eli go up and down completely randomly.

Pair Corralation between Ford and Harvest Eli

Taking into account the 90-day investment horizon Ford is expected to generate 1.35 times less return on investment than Harvest Eli. But when comparing it to its historical volatility, Ford Motor is 1.04 times less risky than Harvest Eli. It trades about 0.04 of its potential returns per unit of risk. Harvest Eli Lilly is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  892.00  in Harvest Eli Lilly on December 28, 2024 and sell it today you would earn a total of  47.00  from holding Harvest Eli Lilly or generate 5.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  Harvest Eli Lilly

Ford Motor

Risk-Adjusted Performance

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.

Harvest Eli Lilly

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harvest Eli Lilly are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, Harvest Eli may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ford and Harvest Eli

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

The idea behind Ford Motor and Harvest Eli Lilly 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.