Correlation Between Ford and Ecoplastic

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

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

Diversification Opportunities for Ford and Ecoplastic

-0.22

Correlation Coefficient

Ford  Ecoplastic

Very good diversification

The 3 months correlation between Ford and Ecoplastic is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ecoplastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecoplastic 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 Ecoplastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecoplastic has no effect on the direction of Ford i.e., Ford and Ecoplastic go up and down completely randomly.

Pair Corralation between Ford and Ecoplastic

Taking into account the 90-day investment horizon Ford is expected to generate 3.05 times less return on investment than Ecoplastic. But when comparing it to its historical volatility, Ford Motor is 1.04 times less risky than Ecoplastic. It trades about 0.02 of its potential returns per unit of risk. Ecoplastic is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  229,000  in Ecoplastic on December 30, 2024 and sell it today you would earn a total of  16,500  from holding Ecoplastic or generate 7.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Ford Motor  vs.  Ecoplastic

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) 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.

Ecoplastic

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ecoplastic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ecoplastic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ford and Ecoplastic

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

The idea behind Ford Motor and Ecoplastic 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.