Correlation Between Ford and Hang Seng
Can any of the company-specific risk be diversified away by investing in both Ford and Hang Seng 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 Hang Seng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Hang Seng Bank, you can compare the effects of market volatilities on Ford and Hang Seng 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 Hang Seng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Hang Seng.
Diversification Opportunities for Ford and Hang Seng
Good diversification
The 3 months correlation between Ford and Hang is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank 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 Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of Ford i.e., Ford and Hang Seng go up and down completely randomly.
Pair Corralation between Ford and Hang Seng
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.44 times more return on investment than Hang Seng. However, Ford is 1.44 times more volatile than Hang Seng Bank. It trades about 0.01 of its potential returns per unit of risk. Hang Seng Bank is currently generating about -0.01 per unit of risk. If you would invest 1,108 in Ford Motor on August 28, 2024 and sell it today you would earn a total of 2.00 from holding Ford Motor or generate 0.18% 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. Hang Seng Bank
Performance |
| Timeline |
| Ford Motor |
| Hang Seng Bank |
Ford and Hang Seng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Hang Seng
The main advantage of trading using opposite Ford and Hang Seng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Hang Seng 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 Hang Seng will offset losses from the drop in Hang Seng's long position.The idea behind Ford Motor and Hang Seng Bank 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.| Hang Seng vs. Caixabank SA ADR | Hang Seng vs. Commercial International Bank | Hang Seng vs. PT Bank Rakyat | Hang Seng vs. Riverview Bancorp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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