Correlation Between Ford and Shenzhen Topway

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

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

Diversification Opportunities for Ford and Shenzhen Topway

0.39

Correlation Coefficient

Ford  Shenzhen Topway

Weak diversification

The 3 months correlation between Ford and Shenzhen is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Shenzhen Topway Video in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Topway Video 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 Shenzhen Topway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Topway Video has no effect on the direction of Ford i.e., Ford and Shenzhen Topway go up and down completely randomly.

Pair Corralation between Ford and Shenzhen Topway

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Shenzhen Topway. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.2 times less risky than Shenzhen Topway. The stock trades about -0.01 of its potential returns per unit of risk. The Shenzhen Topway Video is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  878.00  in Shenzhen Topway Video on September 1, 2024 and sell it today you would earn a total of  144.00  from holding Shenzhen Topway Video or generate 16.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Ford Motor  vs.  Shenzhen Topway Video

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Shenzhen Topway Video

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Topway Video are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Topway sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Shenzhen Topway

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

The idea behind Ford Motor and Shenzhen Topway Video 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.