Correlation Between Ford and Honmyue Enterprise

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

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

Diversification Opportunities for Ford and Honmyue Enterprise

0.42

Correlation Coefficient

Ford  Honmyue Enterprise

Very weak diversification

The 3 months correlation between Ford and Honmyue is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Honmyue Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honmyue Enterprise 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 Honmyue Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honmyue Enterprise has no effect on the direction of Ford i.e., Ford and Honmyue Enterprise go up and down completely randomly.

Pair Corralation between Ford and Honmyue Enterprise

Taking into account the 90-day investment horizon Ford is expected to generate 2.27 times less return on investment than Honmyue Enterprise. In addition to that, Ford is 1.03 times more volatile than Honmyue Enterprise Co. It trades about 0.03 of its total potential returns per unit of risk. Honmyue Enterprise Co is currently generating about 0.07 per unit of volatility. If you would invest  1,230  in Honmyue Enterprise Co on September 3, 2024 and sell it today you would earn a total of  100.00  from holding Honmyue Enterprise Co or generate 8.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Ford Motor  vs.  Honmyue Enterprise Co

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Honmyue Enterprise

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Honmyue Enterprise Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Honmyue Enterprise may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and Honmyue Enterprise

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

The idea behind Ford Motor and Honmyue Enterprise Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..