Correlation Between Ford and Highland Long/short
Can any of the company-specific risk be diversified away by investing in both Ford and Highland Long/short 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 Highland Long/short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Highland Longshort Healthcare, you can compare the effects of market volatilities on Ford and Highland Long/short 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 Highland Long/short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Highland Long/short.
Diversification Opportunities for Ford and Highland Long/short
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Highland is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Long/short 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 Highland Long/short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Long/short has no effect on the direction of Ford i.e., Ford and Highland Long/short go up and down completely randomly.
Pair Corralation between Ford and Highland Long/short
Taking into account the 90-day investment horizon Ford Motor is expected to generate 12.55 times more return on investment than Highland Long/short. However, Ford is 12.55 times more volatile than Highland Longshort Healthcare. It trades about 0.03 of its potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.11 per unit of risk. If you would invest 1,109 in Ford Motor on August 25, 2024 and sell it today you would earn a total of 9.00 from holding Ford Motor or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Highland Longshort Healthcare
Performance |
| Timeline |
| Ford Motor |
| Highland Long/short |
Ford and Highland Long/short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Highland Long/short
The main advantage of trading using opposite Ford and Highland Long/short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Highland Long/short 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 Highland Long/short will offset losses from the drop in Highland Long/short's long position.The idea behind Ford Motor and Highland Longshort Healthcare 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.| Highland Long/short vs. Ultra Short Term Fixed | Highland Long/short vs. Rbc Short Duration | Highland Long/short vs. Ultra Short Fixed Income | Highland Long/short vs. Calvert Short Duration |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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