Correlation Between Ford and Hanwha Chemical
Can any of the company-specific risk be diversified away by investing in both Ford and Hanwha Chemical 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 Hanwha Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Hanwha Chemical Corp, you can compare the effects of market volatilities on Ford and Hanwha Chemical 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 Hanwha Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Hanwha Chemical.
Diversification Opportunities for Ford and Hanwha Chemical
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Hanwha is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hanwha Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Chemical Corp 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 Hanwha Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Chemical Corp has no effect on the direction of Ford i.e., Ford and Hanwha Chemical go up and down completely randomly.
Pair Corralation between Ford and Hanwha Chemical
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.63 times more return on investment than Hanwha Chemical. However, Ford Motor is 1.58 times less risky than Hanwha Chemical. It trades about 0.0 of its potential returns per unit of risk. Hanwha Chemical Corp is currently generating about -0.04 per unit of risk. If you would invest 1,163 in Ford Motor on November 6, 2024 and sell it today you would lose (174.00) from holding Ford Motor or give up 14.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 92.29% |
| Values | Daily Returns |
Ford Motor vs. Hanwha Chemical Corp
Performance |
| Timeline |
| Ford Motor |
| Hanwha Chemical Corp |
Ford and Hanwha Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Hanwha Chemical
The main advantage of trading using opposite Ford and Hanwha Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Hanwha Chemical 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 Hanwha Chemical will offset losses from the drop in Hanwha Chemical's long position.The idea behind Ford Motor and Hanwha Chemical Corp 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.| Hanwha Chemical vs. Insun Environment New | Hanwha Chemical vs. Youngsin Metal Industrial | Hanwha Chemical vs. Nature and Environment | Hanwha Chemical vs. Daechang Steel Co |
Check out your portfolio center.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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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