Correlation Between Ford and Halma Plc
Can any of the company-specific risk be diversified away by investing in both Ford and Halma Plc 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 Halma Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Halma plc, you can compare the effects of market volatilities on Ford and Halma Plc 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 Halma Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Halma Plc.
Diversification Opportunities for Ford and Halma Plc
Very good diversification
The 3 months correlation between Ford and Halma is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Halma plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halma plc 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 Halma Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halma plc has no effect on the direction of Ford i.e., Ford and Halma Plc go up and down completely randomly.
Pair Corralation between Ford and Halma Plc
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Halma Plc. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.14 times less risky than Halma Plc. The stock trades about -0.36 of its potential returns per unit of risk. The Halma plc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,231 in Halma plc on September 29, 2024 and sell it today you would earn a total of 57.00 from holding Halma plc or generate 1.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Ford Motor vs. Halma plc
Performance |
| Timeline |
| Ford Motor |
| Halma plc |
Ford and Halma Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Halma Plc
The main advantage of trading using opposite Ford and Halma Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Halma Plc 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 Halma Plc will offset losses from the drop in Halma Plc's long position.The idea behind Ford Motor and Halma plc 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.| Halma Plc vs. ABB PAR AB | Halma Plc vs. ASSA ABLOY AB | Halma Plc vs. SECOM LTD | Halma Plc vs. Allegion plc |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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