Correlation Between Ford and Dada Nexus

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

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

Diversification Opportunities for Ford and Dada Nexus

-0.22

Correlation Coefficient

Ford  Dada Nexus

Very good diversification

The 3 months correlation between Ford and Dada is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dada Nexus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dada Nexus 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 Dada Nexus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dada Nexus has no effect on the direction of Ford i.e., Ford and Dada Nexus go up and down completely randomly.

Pair Corralation between Ford and Dada Nexus

Given the investment horizon of 90 days Ford Motor is expected to generate 0.18 times more return on investment than Dada Nexus. However, Ford Motor is 5.58 times less risky than Dada Nexus. It trades about 0.03 of its potential returns per unit of risk. Dada Nexus is currently generating about -0.03 per unit of risk. If you would invest  2,056  in Ford Motor on November 29, 2024 and sell it today you would earn a total of  214.00  from holding Ford Motor or generate 10.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Ford Motor  vs.  Dada Nexus

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Dada Nexus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dada Nexus are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Dada Nexus sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Dada Nexus

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

The idea behind Ford Motor and Dada Nexus 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..