Correlation Between Ford and Planting Hope

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

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

Diversification Opportunities for Ford and Planting Hope

0.34

Correlation Coefficient

Ford  Planting Hope

Weak diversification

The 3 months correlation between Ford and Planting is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and The Planting Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planting Hope 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 Planting Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planting Hope has no effect on the direction of Ford i.e., Ford and Planting Hope go up and down completely randomly.

Pair Corralation between Ford and Planting Hope

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Planting Hope. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 103.32 times less risky than Planting Hope. The stock trades about -0.22 of its potential returns per unit of risk. The The Planting Hope is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.15  in The Planting Hope on October 10, 2024 and sell it today you would lose (0.13) from holding The Planting Hope or give up 86.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  The Planting Hope

Ford Motor

Risk-Adjusted Performance

0 of 100

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 abnormal 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.

Planting Hope

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Planting Hope are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal forward-looking signals, Planting Hope reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Planting Hope

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

The idea behind Ford Motor and The Planting Hope 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.