Correlation Between Ford and Health Care

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Ford and Health Care 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 Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Health Care Ultrasector, you can compare the effects of market volatilities on Ford and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Health Care.

Diversification Opportunities for Ford and Health Care

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Ford and Health is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Health Care Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Ultrasector 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Ultrasector has no effect on the direction of Ford i.e., Ford and Health Care go up and down completely randomly.

Pair Corralation between Ford and Health Care

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Health Care. In addition to that, Ford is 1.79 times more volatile than Health Care Ultrasector. It trades about -0.09 of its total potential returns per unit of risk. Health Care Ultrasector is currently generating about 0.25 per unit of volatility. If you would invest  10,101  in Health Care Ultrasector on November 9, 2024 and sell it today you would earn a total of  693.00  from holding Health Care Ultrasector or generate 6.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Health Care Ultrasector

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Health Care Ultrasector 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Health Care Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Health Care is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ford and Health Care Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Health Care

The main advantage of trading using opposite Ford and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.
The idea behind Ford Motor and Health Care Ultrasector 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.
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

Other Complementary Tools

Equity Valuation
Check real value of public entities based on technical and fundamental data
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Portfolio Suggestion
Get suggestions outside of your existing asset allocation including your own model portfolios
Global Markets Map
Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes