Correlation Between Ford and Hallador Energy
Can any of the company-specific risk be diversified away by investing in both Ford and Hallador Energy 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 Hallador Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Hallador Energy, you can compare the effects of market volatilities on Ford and Hallador Energy 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 Hallador Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Hallador Energy.
Diversification Opportunities for Ford and Hallador Energy
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Hallador is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hallador Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hallador Energy 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 Hallador Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hallador Energy has no effect on the direction of Ford i.e., Ford and Hallador Energy go up and down completely randomly.
Pair Corralation between Ford and Hallador Energy
Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.34 times more return on investment than Hallador Energy. However, Ford Motor is 2.92 times less risky than Hallador Energy. It trades about -0.13 of its potential returns per unit of risk. Hallador Energy is currently generating about -0.06 per unit of risk. If you would invest 1,018 in Ford Motor on November 18, 2024 and sell it today you would lose (70.00) from holding Ford Motor or give up 6.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Hallador Energy
Performance |
| Timeline |
| Ford Motor |
| Hallador Energy |
Ford and Hallador Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Hallador Energy
The main advantage of trading using opposite Ford and Hallador Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Hallador Energy 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 Hallador Energy will offset losses from the drop in Hallador Energy's long position.The idea behind Ford Motor and Hallador Energy 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.| Hallador Energy vs. Natural Resource Partners | Hallador Energy vs. Adaro Energy Tbk | Hallador Energy vs. Alliance Resource Partners | Hallador Energy vs. NACCO Industries |
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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