Correlation Between Ford and QVCC

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

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

Diversification Opportunities for Ford and QVCC

0.56

Correlation Coefficient

Ford  QVCC

Very weak diversification

The 3 months correlation between Ford and QVCC is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and QVCC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QVCC 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 QVCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QVCC has no effect on the direction of Ford i.e., Ford and QVCC go up and down completely randomly.

Pair Corralation between Ford and QVCC

Given the investment horizon of 90 days Ford Motor is expected to generate 0.45 times more return on investment than QVCC. However, Ford Motor is 2.22 times less risky than QVCC. It trades about -0.13 of its potential returns per unit of risk. QVCC is currently generating about -0.08 per unit of risk. If you would invest  2,289  in Ford Motor on December 27, 2024 and sell it today you would lose (135.00) from holding Ford Motor or give up 5.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Ford Motor  vs.  QVCC

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. In spite of rather sound basic indicators, Ford is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

QVCC

Risk-Adjusted Performance

Very Weak

Over the last 90 days QVCC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ford and QVCC

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

The idea behind Ford Motor and QVCC 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 Transaction History module to view history of all your transactions and understand their impact on performance.