Correlation Between Ford and Harvest Clean
Can any of the company-specific risk be diversified away by investing in both Ford and Harvest Clean 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 Harvest Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Harvest Clean Energy, you can compare the effects of market volatilities on Ford and Harvest Clean 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 Harvest Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Harvest Clean.
Diversification Opportunities for Ford and Harvest Clean
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Harvest is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Harvest Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Clean Energy 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 Harvest Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Clean Energy has no effect on the direction of Ford i.e., Ford and Harvest Clean go up and down completely randomly.
Pair Corralation between Ford and Harvest Clean
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.59 times more return on investment than Harvest Clean. However, Ford is 1.59 times more volatile than Harvest Clean Energy. It trades about -0.03 of its potential returns per unit of risk. Harvest Clean Energy is currently generating about -0.05 per unit of risk. If you would invest 1,182 in Ford Motor on November 3, 2024 and sell it today you would lose (174.00) from holding Ford Motor or give up 14.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Harvest Clean Energy
Performance |
| Timeline |
| Ford Motor |
| Harvest Clean Energy |
Ford and Harvest Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Harvest Clean
The main advantage of trading using opposite Ford and Harvest Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Harvest Clean 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 Harvest Clean will offset losses from the drop in Harvest Clean's long position.The idea behind Ford Motor and Harvest Clean Energy 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.| Harvest Clean vs. Harvest Premium Yield | Harvest Clean vs. Harvest Balanced Income | Harvest Clean vs. Harvest Diversified High | Harvest Clean vs. Harvest Energy Leaders |
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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