Correlation Between Ford and Hennessy Focus
Can any of the company-specific risk be diversified away by investing in both Ford and Hennessy Focus 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 Hennessy Focus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Hennessy Focus Fund, you can compare the effects of market volatilities on Ford and Hennessy Focus 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 Hennessy Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Hennessy Focus.
Diversification Opportunities for Ford and Hennessy Focus
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ford and Hennessy is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hennessy Focus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Focus 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 Hennessy Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Focus has no effect on the direction of Ford i.e., Ford and Hennessy Focus go up and down completely randomly.
Pair Corralation between Ford and Hennessy Focus
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Hennessy Focus. In addition to that, Ford is 1.48 times more volatile than Hennessy Focus Fund. It trades about -0.02 of its total potential returns per unit of risk. Hennessy Focus Fund is currently generating about 0.02 per unit of volatility. If you would invest 4,317 in Hennessy Focus Fund on November 5, 2024 and sell it today you would earn a total of 158.00 from holding Hennessy Focus Fund or generate 3.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Hennessy Focus Fund
Performance |
| Timeline |
| Ford Motor |
| Hennessy Focus |
Ford and Hennessy Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Hennessy Focus
The main advantage of trading using opposite Ford and Hennessy Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Hennessy Focus 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 Hennessy Focus will offset losses from the drop in Hennessy Focus' long position.The idea behind Ford Motor and Hennessy Focus Fund 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.| Hennessy Focus vs. Hennessy Nerstone Mid | Hennessy Focus vs. Amg Yacktman Focused | Hennessy Focus vs. Parnassus Endeavor Fund | Hennessy Focus vs. Hennessy Small Cap |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Commodity Directory Find actively traded commodities issued by global exchanges |