Correlation Between Ford and Cathay Koreataiwan

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

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

Diversification Opportunities for Ford and Cathay Koreataiwan

0.0

Correlation Coefficient

Ford  Cathay Koreataiwan

Pay attention - limited upside

The 3 months correlation between Ford and Cathay is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cathay Koreataiwan IT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Koreataiwan 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 Cathay Koreataiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Koreataiwan has no effect on the direction of Ford i.e., Ford and Cathay Koreataiwan go up and down completely randomly.

Pair Corralation between Ford and Cathay Koreataiwan

Taking into account the 90-day investment horizon Ford is expected to generate 5.21 times less return on investment than Cathay Koreataiwan. In addition to that, Ford is 1.65 times more volatile than Cathay Koreataiwan IT. It trades about 0.01 of its total potential returns per unit of risk. Cathay Koreataiwan IT is currently generating about 0.05 per unit of volatility. If you would invest  2,441  in Cathay Koreataiwan IT on September 27, 2024 and sell it today you would earn a total of  849.00  from holding Cathay Koreataiwan IT or generate 34.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.58%
Values	Daily Returns

Ford Motor  vs.  Cathay Koreataiwan IT

Ford Motor

Risk-Adjusted Performance

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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.

Cathay Koreataiwan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay Koreataiwan IT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cathay Koreataiwan is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Cathay Koreataiwan

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

The idea behind Ford Motor and Cathay Koreataiwan IT 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.