Correlation Between Ford and Soho House

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

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

Diversification Opportunities for Ford and Soho House

-0.03

Correlation Coefficient

Ford  Soho House

Good diversification

The 3 months correlation between Ford and Soho is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Soho House Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soho House 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 Soho House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soho House has no effect on the direction of Ford i.e., Ford and Soho House go up and down completely randomly.

Pair Corralation between Ford and Soho House

Given the investment horizon of 90 days Ford Motor is expected to under-perform the Soho House. But the preferred stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 5.14 times less risky than Soho House. The preferred stock trades about -0.12 of its potential returns per unit of risk. The Soho House Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  722.00  in Soho House Co on December 19, 2024 and sell it today you would lose (55.00) from holding Soho House Co or give up 7.62% of portfolio value over 90 days.

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

Ford Motor  vs.  Soho House Co

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.

Soho House

Risk-Adjusted Performance

Very Weak

Over the last 90 days Soho House Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Soho House is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Soho House

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

The idea behind Ford Motor and Soho House Co 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.