Correlation Between Ford and Celltrion Pharm

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

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

Diversification Opportunities for Ford and Celltrion Pharm

0.01

Correlation Coefficient

Ford  Celltrion Pharm

Significant diversification

The 3 months correlation between Ford and Celltrion is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Celltrion Pharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celltrion Pharm 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 Celltrion Pharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celltrion Pharm has no effect on the direction of Ford i.e., Ford and Celltrion Pharm go up and down completely randomly.

Pair Corralation between Ford and Celltrion Pharm

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.01 times more return on investment than Celltrion Pharm. However, Ford is 1.01 times more volatile than Celltrion Pharm. It trades about 0.05 of its potential returns per unit of risk. Celltrion Pharm is currently generating about -0.06 per unit of risk. If you would invest  959.00  in Ford Motor on December 21, 2024 and sell it today you would earn a total of  42.00  from holding Ford Motor or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.92%
Values	Daily Returns

Ford Motor  vs.  Celltrion Pharm

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.

Celltrion Pharm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Celltrion Pharm has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ford and Celltrion Pharm

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

The idea behind Ford Motor and Celltrion Pharm 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.