Correlation Between Ford and Daesung Eltec

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

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

Diversification Opportunities for Ford and Daesung Eltec

0.43

Correlation Coefficient

Ford  Daesung Eltec

Very weak diversification

The 3 months correlation between Ford and Daesung is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Daesung Eltec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daesung Eltec 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 Daesung Eltec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daesung Eltec has no effect on the direction of Ford i.e., Ford and Daesung Eltec go up and down completely randomly.

Pair Corralation between Ford and Daesung Eltec

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Daesung Eltec. In addition to that, Ford is 1.04 times more volatile than Daesung Eltec Co. It trades about -0.22 of its total potential returns per unit of risk. Daesung Eltec Co is currently generating about 0.08 per unit of volatility. If you would invest  83,300  in Daesung Eltec Co on October 9, 2024 and sell it today you would earn a total of  1,700  from holding Daesung Eltec Co or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Ford Motor  vs.  Daesung Eltec 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Daesung Eltec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daesung Eltec Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ford and Daesung Eltec

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

The idea behind Ford Motor and Daesung Eltec 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.