Correlation Between Ford and Limin Chemical

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

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

Diversification Opportunities for Ford and Limin Chemical

0.18

Correlation Coefficient

Ford  Limin Chemical

Average diversification

The 3 months correlation between Ford and Limin is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Limin Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limin Chemical 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 Limin Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limin Chemical has no effect on the direction of Ford i.e., Ford and Limin Chemical go up and down completely randomly.

Pair Corralation between Ford and Limin Chemical

Taking into account the 90-day investment horizon Ford is expected to generate 3.91 times less return on investment than Limin Chemical. But when comparing it to its historical volatility, Ford Motor is 1.22 times less risky than Limin Chemical. It trades about 0.05 of its potential returns per unit of risk. Limin Chemical Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  823.00  in Limin Chemical Co on December 20, 2024 and sell it today you would earn a total of  180.00  from holding Limin Chemical Co or generate 21.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Ford Motor  vs.  Limin Chemical Co

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) 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.

Limin Chemical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Limin Chemical Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Limin Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Limin Chemical

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

The idea behind Ford Motor and Limin Chemical 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .