Correlation Between Ford and HIM International
Can any of the company-specific risk be diversified away by investing in both Ford and HIM International 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 HIM International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and HIM International Music, you can compare the effects of market volatilities on Ford and HIM International 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 HIM International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and HIM International.
Diversification Opportunities for Ford and HIM International
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ford and HIM is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and HIM International Music in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HIM International Music 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 HIM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HIM International Music has no effect on the direction of Ford i.e., Ford and HIM International go up and down completely randomly.
Pair Corralation between Ford and HIM International
Taking into account the 90-day investment horizon Ford is expected to generate 1.07 times less return on investment than HIM International. In addition to that, Ford is 1.57 times more volatile than HIM International Music. It trades about 0.04 of its total potential returns per unit of risk. HIM International Music is currently generating about 0.07 per unit of volatility. If you would invest 10,200 in HIM International Music on August 26, 2024 and sell it today you would earn a total of 2,350 from holding HIM International Music or generate 23.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.59% |
| Values | Daily Returns |
Ford Motor vs. HIM International Music
Performance |
| Timeline |
| Ford Motor |
| HIM International Music |
Ford and HIM International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and HIM International
The main advantage of trading using opposite Ford and HIM International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, HIM International 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 HIM International will offset losses from the drop in HIM International's long position.The idea behind Ford Motor and HIM International Music 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.| HIM International vs. Syntek Semiconductor Co | HIM International vs. Leader Electronics | HIM International vs. Excellence Optoelectronic | HIM International vs. Microelectronics Technology |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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