Correlation Between Ford and I Components

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

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

Diversification Opportunities for Ford and I Components

-0.69

Correlation Coefficient

Ford  I Components

Excellent diversification

The 3 months correlation between Ford and 059100 is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and i Components Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on i Components 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 I Components. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of i Components has no effect on the direction of Ford i.e., Ford and I Components go up and down completely randomly.

Pair Corralation between Ford and I Components

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the I Components. In addition to that, Ford is 1.11 times more volatile than i Components Co. It trades about -0.03 of its total potential returns per unit of risk. i Components Co is currently generating about 0.13 per unit of volatility. If you would invest  460,000  in i Components Co on October 20, 2024 and sell it today you would earn a total of  69,000  from holding i Components Co or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Ford Motor  vs.  i Components 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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

i Components

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in i Components Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, I Components sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and I Components

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

The idea behind Ford Motor and i Components 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.