Correlation Between Ford and Zhejiang Zanyu

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

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

Diversification Opportunities for Ford and Zhejiang Zanyu

0.13

Correlation Coefficient

Ford  Zhejiang Zanyu

Average diversification

The 3 months correlation between Ford and Zhejiang is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Zhejiang Zanyu Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Zanyu Technology 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 Zhejiang Zanyu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Zanyu Technology has no effect on the direction of Ford i.e., Ford and Zhejiang Zanyu go up and down completely randomly.

Pair Corralation between Ford and Zhejiang Zanyu

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Zhejiang Zanyu. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.41 times less risky than Zhejiang Zanyu. The stock trades about -0.03 of its potential returns per unit of risk. The Zhejiang Zanyu Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  965.00  in Zhejiang Zanyu Technology on October 8, 2024 and sell it today you would lose (15.00) from holding Zhejiang Zanyu Technology or give up 1.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Ford Motor  vs.  Zhejiang Zanyu Technology

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.

Zhejiang Zanyu Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Zanyu Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhejiang Zanyu 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 Zhejiang Zanyu

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

The idea behind Ford Motor and Zhejiang Zanyu Technology 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.