Correlation Between Ford and Mr Cooper

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

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

Diversification Opportunities for Ford and Mr Cooper

0.3

Correlation Coefficient

Ford  Mr Cooper

Weak diversification

The 3 months correlation between Ford and 07WA is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mr Cooper Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr Cooper Group 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 Mr Cooper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr Cooper Group has no effect on the direction of Ford i.e., Ford and Mr Cooper go up and down completely randomly.

Pair Corralation between Ford and Mr Cooper

Taking into account the 90-day investment horizon Ford is expected to generate 7.55 times less return on investment than Mr Cooper. In addition to that, Ford is 1.1 times more volatile than Mr Cooper Group. It trades about 0.01 of its total potential returns per unit of risk. Mr Cooper Group is currently generating about 0.1 per unit of volatility. If you would invest  3,697  in Mr Cooper Group on September 23, 2024 and sell it today you would earn a total of  5,303  from holding Mr Cooper Group or generate 143.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.03%
Values	Daily Returns

Ford Motor  vs.  Mr Cooper Group

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Mr Cooper Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Cooper Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mr Cooper may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and Mr Cooper

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

The idea behind Ford Motor and Mr Cooper Group 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.