Correlation Between Ford and Sieyuan Electric

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

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

Diversification Opportunities for Ford and Sieyuan Electric

0.26

Correlation Coefficient

Ford  Sieyuan Electric

Modest diversification

The 3 months correlation between Ford and Sieyuan is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sieyuan Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sieyuan Electric 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 Sieyuan Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sieyuan Electric has no effect on the direction of Ford i.e., Ford and Sieyuan Electric go up and down completely randomly.

Pair Corralation between Ford and Sieyuan Electric

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Sieyuan Electric. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.08 times less risky than Sieyuan Electric. The stock trades about -0.05 of its potential returns per unit of risk. The Sieyuan Electric Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,825  in Sieyuan Electric Co on September 19, 2024 and sell it today you would earn a total of  252.00  from holding Sieyuan Electric Co or generate 3.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Ford Motor  vs.  Sieyuan Electric Co

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 nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Sieyuan Electric

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sieyuan Electric Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sieyuan Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Sieyuan Electric

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

The idea behind Ford Motor and Sieyuan Electric 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.