Correlation Between Ford and Highland Longshort

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

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

Diversification Opportunities for Ford and Highland Longshort

0.36

Correlation Coefficient

Ford  Highland Longshort

Weak diversification

The 3 months correlation between Ford and Highland is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Longshort 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 Highland Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Longshort has no effect on the direction of Ford i.e., Ford and Highland Longshort go up and down completely randomly.

Pair Corralation between Ford and Highland Longshort

Taking into account the 90-day investment horizon Ford Motor is expected to generate 11.22 times more return on investment than Highland Longshort. However, Ford is 11.22 times more volatile than Highland Longshort Healthcare. It trades about 0.02 of its potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.12 per unit of risk. If you would invest  947.00  in Ford Motor on September 15, 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Highland Longshort 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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Highland Longshort

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Longshort Healthcare are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Highland Longshort 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 Highland Longshort

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

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