Correlation Between Ford and Naturhouse Health

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

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

Diversification Opportunities for Ford and Naturhouse Health

0.13

Correlation Coefficient

Ford  Naturhouse Health

Average diversification

The 3 months correlation between Ford and Naturhouse is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Naturhouse Health SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naturhouse Health 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 Naturhouse Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naturhouse Health has no effect on the direction of Ford i.e., Ford and Naturhouse Health go up and down completely randomly.

Pair Corralation between Ford and Naturhouse Health

Taking into account the 90-day investment horizon Ford is expected to generate 2.63 times less return on investment than Naturhouse Health. In addition to that, Ford is 1.82 times more volatile than Naturhouse Health SA. It trades about 0.0 of its total potential returns per unit of risk. Naturhouse Health SA is currently generating about 0.02 per unit of volatility. If you would invest  167.00  in Naturhouse Health SA on September 12, 2024 and sell it today you would earn a total of  2.00  from holding Naturhouse Health SA or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  Naturhouse Health SA

Ford Motor

Risk-Adjusted Performance

0 of 100

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.

Naturhouse Health

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naturhouse Health SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Naturhouse Health is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and Naturhouse Health

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

The idea behind Ford Motor and Naturhouse Health SA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.