Correlation Between Ford and Herms International
Can any of the company-specific risk be diversified away by investing in both Ford and Herms International 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 Herms International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Herms International Socit, you can compare the effects of market volatilities on Ford and Herms International 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 Herms International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Herms International.
Diversification Opportunities for Ford and Herms International
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ford and Herms is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Herms International Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herms International Socit 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 Herms International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herms International Socit has no effect on the direction of Ford i.e., Ford and Herms International go up and down completely randomly.
Pair Corralation between Ford and Herms International
Taking into account the 90-day investment horizon Ford is expected to generate 5.03 times less return on investment than Herms International. In addition to that, Ford is 1.32 times more volatile than Herms International Socit. It trades about 0.01 of its total potential returns per unit of risk. Herms International Socit is currently generating about 0.06 per unit of volatility. If you would invest 152,537 in Herms International Socit on September 26, 2024 and sell it today you would earn a total of 78,363 from holding Herms International Socit or generate 51.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.22% |
| Values | Daily Returns |
Ford Motor vs. Herms International Socit
Performance |
| Timeline |
| Ford Motor |
| Herms International Socit |
Ford and Herms International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Herms International
The main advantage of trading using opposite Ford and Herms International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Herms International 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 Herms International will offset losses from the drop in Herms International's long position.The idea behind Ford Motor and Herms International Socit 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.| Herms International vs. LVMH Mot Hennessy | Herms International vs. CHRISTIAN DIOR ADR14EO2 | Herms International vs. Christian Dior SE | Herms International vs. The Swatch Group |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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