Correlation Between Ford and Chinyang Hold

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

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

Diversification Opportunities for Ford and Chinyang Hold

-0.35

Correlation Coefficient

Ford  Chinyang Hold

Very good diversification

The 3 months correlation between Ford and Chinyang is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Chinyang Hold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinyang Hold 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 Chinyang Hold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinyang Hold has no effect on the direction of Ford i.e., Ford and Chinyang Hold go up and down completely randomly.

Pair Corralation between Ford and Chinyang Hold

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Chinyang Hold. In addition to that, Ford is 1.1 times more volatile than Chinyang Hold. It trades about -0.39 of its total potential returns per unit of risk. Chinyang Hold is currently generating about 0.02 per unit of volatility. If you would invest  317,500  in Chinyang Hold on September 23, 2024 and sell it today you would earn a total of  1,000.00  from holding Chinyang Hold or generate 0.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Chinyang Hold

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.

Chinyang Hold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinyang Hold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chinyang Hold 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 Chinyang Hold

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

The idea behind Ford Motor and Chinyang Hold 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.