Correlation Between Ford and HCI
Can any of the company-specific risk be diversified away by investing in both Ford and HCI 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 HCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and HCI Group, you can compare the effects of market volatilities on Ford and HCI 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 HCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and HCI.
Diversification Opportunities for Ford and HCI
Average diversification
The 3 months correlation between Ford and HCI is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and HCI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCI Group 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 HCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCI Group has no effect on the direction of Ford i.e., Ford and HCI go up and down completely randomly.
Pair Corralation between Ford and HCI
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the HCI. In addition to that, Ford is 1.37 times more volatile than HCI Group. It trades about 0.0 of its total potential returns per unit of risk. HCI Group is currently generating about 0.0 per unit of volatility. If you would invest 11,669 in HCI Group on August 29, 2024 and sell it today you would lose (68.00) from holding HCI Group or give up 0.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. HCI Group
Performance |
| Timeline |
| Ford Motor |
| HCI Group |
Ford and HCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and HCI
The main advantage of trading using opposite Ford and HCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, HCI 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 HCI will offset losses from the drop in HCI's long position.The idea behind Ford Motor and HCI Group 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.| HCI vs. Universal Insurance Holdings | HCI vs. Kingstone Companies | HCI vs. Horace Mann Educators | HCI vs. Heritage Insurance Hldgs |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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