Correlation Between Ford and Herman Miller
Can any of the company-specific risk be diversified away by investing in both Ford and Herman Miller 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 Herman Miller into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Herman Miller, you can compare the effects of market volatilities on Ford and Herman Miller 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 Herman Miller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Herman Miller.
Diversification Opportunities for Ford and Herman Miller
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Herman is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Herman Miller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herman Miller 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 Herman Miller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herman Miller has no effect on the direction of Ford i.e., Ford and Herman Miller go up and down completely randomly.
Pair Corralation between Ford and Herman Miller
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Herman Miller. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.16 times less risky than Herman Miller. The stock trades about -0.02 of its potential returns per unit of risk. The Herman Miller is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,407 in Herman Miller on November 3, 2024 and sell it today you would lose (267.00) from holding Herman Miller or give up 11.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Ford Motor vs. Herman Miller
Performance |
| Timeline |
| Ford Motor |
| Herman Miller |
Ford and Herman Miller Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Herman Miller
The main advantage of trading using opposite Ford and Herman Miller positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Herman Miller 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 Herman Miller will offset losses from the drop in Herman Miller's long position.The idea behind Ford Motor and Herman Miller 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.| Herman Miller vs. BlueScope Steel Limited | Herman Miller vs. Monument Mining Limited | Herman Miller vs. GRIFFIN MINING LTD | Herman Miller vs. Khiron Life Sciences |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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