Correlation Between Ford and The Hartford
Can any of the company-specific risk be diversified away by investing in both Ford and The Hartford 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 The Hartford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and The Hartford Short, you can compare the effects of market volatilities on Ford and The Hartford 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 The Hartford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and The Hartford.
Diversification Opportunities for Ford and The Hartford
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and The is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and The Hartford Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford 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 The Hartford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Short has no effect on the direction of Ford i.e., Ford and The Hartford go up and down completely randomly.
Pair Corralation between Ford and The Hartford
Taking into account the 90-day investment horizon Ford Motor is expected to generate 21.83 times more return on investment than The Hartford. However, Ford is 21.83 times more volatile than The Hartford Short. It trades about 0.25 of its potential returns per unit of risk. The Hartford Short is currently generating about 0.22 per unit of risk. If you would invest 1,008 in Ford Motor on September 2, 2024 and sell it today you would earn a total of 105.00 from holding Ford Motor or generate 10.42% 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. The Hartford Short
Performance |
| Timeline |
| Ford Motor |
| Hartford Short |
Ford and The Hartford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and The Hartford
The main advantage of trading using opposite Ford and The Hartford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, The Hartford 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 The Hartford will offset losses from the drop in The Hartford's long position.The idea behind Ford Motor and The Hartford Short 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.| The Hartford vs. The Hartford Growth | The Hartford vs. The Hartford Growth | The Hartford vs. The Hartford Growth | The Hartford vs. The Hartford Growth |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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