Correlation Between Ford and Qurate Retail

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

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

Diversification Opportunities for Ford and Qurate Retail

-0.55

Correlation Coefficient

Ford  Qurate Retail

Excellent diversification

The 3 months correlation between Ford and Qurate is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Qurate Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qurate Retail 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 Qurate Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qurate Retail has no effect on the direction of Ford i.e., Ford and Qurate Retail go up and down completely randomly.

Pair Corralation between Ford and Qurate Retail

Given the investment horizon of 90 days Ford Motor is expected to under-perform the Qurate Retail. But the preferred stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 3.52 times less risky than Qurate Retail. The preferred stock trades about -0.1 of its potential returns per unit of risk. The Qurate Retail is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,974  in Qurate Retail on September 1, 2024 and sell it today you would earn a total of  274.00  from holding Qurate Retail or generate 6.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Qurate Retail

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 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.

Qurate Retail

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Qurate Retail are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Qurate Retail may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Ford and Qurate Retail

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

The idea behind Ford Motor and Qurate Retail 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.