Correlation Between Ford and Harding Loevner
Can any of the company-specific risk be diversified away by investing in both Ford and Harding Loevner 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 Harding Loevner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Harding Loevner Frontier, you can compare the effects of market volatilities on Ford and Harding Loevner 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 Harding Loevner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Harding Loevner.
Diversification Opportunities for Ford and Harding Loevner
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Harding is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Harding Loevner Frontier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Frontier 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 Harding Loevner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harding Loevner Frontier has no effect on the direction of Ford i.e., Ford and Harding Loevner go up and down completely randomly.
Pair Corralation between Ford and Harding Loevner
Taking into account the 90-day investment horizon Ford Motor is expected to generate 4.83 times more return on investment than Harding Loevner. However, Ford is 4.83 times more volatile than Harding Loevner Frontier. It trades about 0.19 of its potential returns per unit of risk. Harding Loevner Frontier is currently generating about -0.21 per unit of risk. If you would invest 1,027 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 83.00 from holding Ford Motor or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Harding Loevner Frontier
Performance |
| Timeline |
| Ford Motor |
| Harding Loevner Frontier |
Ford and Harding Loevner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Harding Loevner
The main advantage of trading using opposite Ford and Harding Loevner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Harding Loevner 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 Harding Loevner will offset losses from the drop in Harding Loevner's long position.The idea behind Ford Motor and Harding Loevner Frontier 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.| Harding Loevner vs. Vanguard Emerging Markets | Harding Loevner vs. Vanguard Emerging Markets | Harding Loevner vs. HUMANA INC | Harding Loevner vs. Aquagold International |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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