Correlation Between Ford and Hartford Schroders

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

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

Diversification Opportunities for Ford and Hartford Schroders

0.53

Correlation Coefficient

Ford  Hartford Schroders

Very weak diversification

The 3 months correlation between Ford and Hartford is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hartford Schroders Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Schroders 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 Hartford Schroders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Schroders has no effect on the direction of Ford i.e., Ford and Hartford Schroders go up and down completely randomly.

Pair Corralation between Ford and Hartford Schroders

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Hartford Schroders. In addition to that, Ford is 1.73 times more volatile than Hartford Schroders Smallmid. It trades about -0.01 of its total potential returns per unit of risk. Hartford Schroders Smallmid is currently generating about 0.0 per unit of volatility. If you would invest  1,878  in Hartford Schroders Smallmid on September 15, 2024 and sell it today you would lose (3.00) from holding Hartford Schroders Smallmid or give up 0.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Hartford Schroders Smallmid

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.

Hartford Schroders

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hartford Schroders Smallmid has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Hartford Schroders is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Hartford Schroders

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

The idea behind Ford Motor and Hartford Schroders Smallmid 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.