Correlation Between Ford and Hannover Rck

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

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

Diversification Opportunities for Ford and Hannover Rck

-0.18

Correlation Coefficient

Ford  Hannover Rck

Good diversification

The 3 months correlation between Ford and Hannover is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hannover Rck SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannover Rck SE 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 Hannover Rck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannover Rck SE has no effect on the direction of Ford i.e., Ford and Hannover Rck go up and down completely randomly.

Pair Corralation between Ford and Hannover Rck

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Hannover Rck. In addition to that, Ford is 1.24 times more volatile than Hannover Rck SE. It trades about -0.21 of its total potential returns per unit of risk. Hannover Rck SE is currently generating about 0.1 per unit of volatility. If you would invest  25,522  in Hannover Rck SE on September 21, 2024 and sell it today you would earn a total of  783.00  from holding Hannover Rck SE or generate 3.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Ford Motor  vs.  Hannover Rck SE

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Hannover Rck SE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hannover Rck SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hannover Rck reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Hannover Rck

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

The idea behind Ford Motor and Hannover Rck SE 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.