Correlation Between Ford and Hartford Healthcare

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

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

Diversification Opportunities for Ford and Hartford Healthcare

-0.25

Correlation Coefficient

Ford  Hartford Healthcare

Very good diversification

The 3 months correlation between Ford and Hartford is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and The Hartford Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Hartford Healthcare 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 Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Hartford Healthcare has no effect on the direction of Ford i.e., Ford and Hartford Healthcare go up and down completely randomly.

Pair Corralation between Ford and Hartford Healthcare

Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.85 times more return on investment than Hartford Healthcare. However, Ford is 2.85 times more volatile than The Hartford Healthcare. It trades about 0.02 of its potential returns per unit of risk. The Hartford Healthcare is currently generating about 0.02 per unit of risk. If you would invest  947.00  in Ford Motor on September 14, 2024 and sell it today you would earn a total of  92.00  from holding Ford Motor or generate 9.71% 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.  The Hartford Healthcare

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

The Hartford Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Hartford Healthcare has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Ford and Hartford Healthcare

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

The idea behind Ford Motor and The Hartford Healthcare 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.