Correlation Between Ford and Harvia Oyj
Can any of the company-specific risk be diversified away by investing in both Ford and Harvia Oyj 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 Harvia Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Harvia Oyj, you can compare the effects of market volatilities on Ford and Harvia Oyj 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 Harvia Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Harvia Oyj.
Diversification Opportunities for Ford and Harvia Oyj
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Harvia is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Harvia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvia Oyj 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 Harvia Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvia Oyj has no effect on the direction of Ford i.e., Ford and Harvia Oyj go up and down completely randomly.
Pair Corralation between Ford and Harvia Oyj
Taking into account the 90-day investment horizon Ford is expected to generate 1.52 times less return on investment than Harvia Oyj. But when comparing it to its historical volatility, Ford Motor is 1.03 times less risky than Harvia Oyj. It trades about 0.03 of its potential returns per unit of risk. Harvia Oyj is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,238 in Harvia Oyj on August 31, 2024 and sell it today you would earn a total of 192.00 from holding Harvia Oyj or generate 4.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Ford Motor vs. Harvia Oyj
Performance |
| Timeline |
| Ford Motor |
| Harvia Oyj |
Ford and Harvia Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Harvia Oyj
The main advantage of trading using opposite Ford and Harvia Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Harvia Oyj 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 Harvia Oyj will offset losses from the drop in Harvia Oyj's long position.The idea behind Ford Motor and Harvia Oyj 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.| Harvia Oyj vs. Qt Group Oyj | Harvia Oyj vs. Kamux Suomi Oy | Harvia Oyj vs. Sampo Oyj A | Harvia Oyj vs. Tokmanni Group Oyj |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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