Correlation Between Ford and BK Variable

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

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

Diversification Opportunities for Ford and BK Variable

-0.31

Correlation Coefficient

Ford  BK Variable

Very good diversification

The 3 months correlation between Ford and 0P0000120T is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BK Variable Internacional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BK Variable Internacional 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 BK Variable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BK Variable Internacional has no effect on the direction of Ford i.e., Ford and BK Variable go up and down completely randomly.

Pair Corralation between Ford and BK Variable

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the BK Variable. In addition to that, Ford is 2.21 times more volatile than BK Variable Internacional. It trades about -0.22 of its total potential returns per unit of risk. BK Variable Internacional is currently generating about -0.08 per unit of volatility. If you would invest  1,788  in BK Variable Internacional on October 12, 2024 and sell it today you would lose (19.00) from holding BK Variable Internacional or give up 1.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Ford Motor  vs.  BK Variable Internacional

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.

BK Variable Internacional

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BK Variable Internacional are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, BK Variable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and BK Variable

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

The idea behind Ford Motor and BK Variable Internacional 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 Transaction History module to view history of all your transactions and understand their impact on performance.