Correlation Between Ford and Hamilton Beach

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

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

Diversification Opportunities for Ford and Hamilton Beach

0.06

Correlation Coefficient

Ford  Hamilton Beach

Significant diversification

The 24 months correlation between Ford and Hamilton is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hamilton Beach Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Beach Brands 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 Hamilton Beach. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Beach Brands has no effect on the direction of Ford i.e., Ford and Hamilton Beach go up and down completely randomly.

Pair Corralation between Ford and Hamilton Beach

Taking into account the 90-day investment horizon Ford is expected to generate 6.13 times less return on investment than Hamilton Beach. But when comparing it to its historical volatility, Ford Motor is 1.36 times less risky than Hamilton Beach. It trades about 0.04 of its potential returns per unit of risk. Hamilton Beach Brands is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,240  in Hamilton Beach Brands on January 18, 2024 and sell it today you would earn a total of  1,120  from holding Hamilton Beach Brands or generate 90.32% return on investment over 90 days.

Time Period	24 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Hamilton Beach Brands

Ford Motor

Risk-Adjusted Performance

0 of 100

OK

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

Hamilton Beach Brands

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Beach Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Hamilton Beach sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Hamilton Beach

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

The idea behind Ford Motor and Hamilton Beach Brands 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.