Correlation Between Ford and AP Moeller

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

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

Diversification Opportunities for Ford and AP Moeller

0.09

Correlation Coefficient

Ford  AP Moeller

Significant diversification

The 3 months correlation between Ford and 0O77 is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AP Moeller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Moeller 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 AP Moeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Moeller has no effect on the direction of Ford i.e., Ford and AP Moeller go up and down completely randomly.

Pair Corralation between Ford and AP Moeller

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the AP Moeller. In addition to that, Ford is 1.01 times more volatile than AP Moeller . It trades about -0.04 of its total potential returns per unit of risk. AP Moeller is currently generating about 0.01 per unit of volatility. If you would invest  1,169,247  in AP Moeller on September 23, 2024 and sell it today you would lose (27,247) from holding AP Moeller or give up 2.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.45%
Values	Daily Returns

Ford Motor  vs.  AP Moeller

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.

AP Moeller

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AP Moeller are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AP Moeller may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and AP Moeller

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

The idea behind Ford Motor and AP Moeller 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.