Correlation Between Ford and Cherrybro CoLtd

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

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

Diversification Opportunities for Ford and Cherrybro CoLtd

-0.02

Correlation Coefficient

Ford  Cherrybro CoLtd

Good diversification

The 3 months correlation between Ford and Cherrybro is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cherrybro coLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cherrybro coLtd 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 Cherrybro CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cherrybro coLtd has no effect on the direction of Ford i.e., Ford and Cherrybro CoLtd go up and down completely randomly.

Pair Corralation between Ford and Cherrybro CoLtd

Taking into account the 90-day investment horizon Ford is expected to generate 1.94 times less return on investment than Cherrybro CoLtd. But when comparing it to its historical volatility, Ford Motor is 2.07 times less risky than Cherrybro CoLtd. It trades about 0.05 of its potential returns per unit of risk. Cherrybro coLtd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  80,000  in Cherrybro coLtd on December 21, 2024 and sell it today you would earn a total of  4,600  from holding Cherrybro coLtd or generate 5.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.33%
Values	Daily Returns

Ford Motor  vs.  Cherrybro coLtd

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.

Cherrybro coLtd

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cherrybro coLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cherrybro CoLtd may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ford and Cherrybro CoLtd

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

The idea behind Ford Motor and Cherrybro coLtd 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.