Correlation Between Ford and Howden Joinery

Can any of the company-specific risk be diversified away by investing in both Ford and Howden Joinery 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 Howden Joinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and Howden Joinery Group, you can compare the effects of market volatilities on Ford and Howden Joinery 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 Howden Joinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Howden Joinery.

Diversification Opportunities for Ford and Howden Joinery

0.0

Correlation Coefficient

Ford  Howden Joinery

Pay attention - limited upside

The 3 months correlation between Ford and Howden is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Howden Joinery Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Howden Joinery Group 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 Howden Joinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Howden Joinery Group has no effect on the direction of Ford i.e., Ford and Howden Joinery go up and down completely randomly.

Pair Corralation between Ford and Howden Joinery

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Howden Joinery. In addition to that, Ford is 1.27 times more volatile than Howden Joinery Group. It trades about -0.35 of its total potential returns per unit of risk. Howden Joinery Group is currently generating about -0.12 per unit of volatility. If you would invest  976.00  in Howden Joinery Group on September 27, 2024 and sell it today you would lose (27.00) from holding Howden Joinery Group or give up 2.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Howden Joinery Group

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Howden Joinery Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Howden Joinery Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ford and Howden Joinery

The main advantage of trading using opposite Ford and Howden Joinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Howden Joinery 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 Howden Joinery will offset losses from the drop in Howden Joinery's long position.

The idea behind Ford Motor and Howden Joinery Group 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.