Correlation Between Ford and Cembra Money

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

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

Diversification Opportunities for Ford and Cembra Money

0.17

Correlation Coefficient

Ford  Cembra Money

Average diversification

The 3 months correlation between Ford and Cembra is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cembra Money Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cembra Money Bank 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 Cembra Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cembra Money Bank has no effect on the direction of Ford i.e., Ford and Cembra Money go up and down completely randomly.

Pair Corralation between Ford and Cembra Money

Taking into account the 90-day investment horizon Ford is expected to generate 4.2 times less return on investment than Cembra Money. In addition to that, Ford is 1.54 times more volatile than Cembra Money Bank. It trades about 0.04 of its total potential returns per unit of risk. Cembra Money Bank is currently generating about 0.24 per unit of volatility. If you would invest  8,195  in Cembra Money Bank on December 28, 2024 and sell it today you would earn a total of  1,815  from holding Cembra Money Bank or generate 22.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  Cembra Money Bank

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) 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.

Cembra Money Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cembra Money Bank are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cembra Money unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Cembra Money

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

The idea behind Ford Motor and Cembra Money Bank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.