Correlation Between Ford and Cofina SGPS

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

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

Diversification Opportunities for Ford and Cofina SGPS

0.28

Correlation Coefficient

Ford  Cofina SGPS

Modest diversification

The 3 months correlation between Ford and Cofina is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cofina SGPS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cofina SGPS SA 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 Cofina SGPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cofina SGPS SA has no effect on the direction of Ford i.e., Ford and Cofina SGPS go up and down completely randomly.

Pair Corralation between Ford and Cofina SGPS

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.05 times more return on investment than Cofina SGPS. However, Ford Motor is 20.99 times less risky than Cofina SGPS. It trades about 0.13 of its potential returns per unit of risk. Cofina SGPS SA is currently generating about -0.06 per unit of risk. If you would invest  990.00  in Ford Motor on October 22, 2024 and sell it today you would earn a total of  28.00  from holding Ford Motor or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	84.21%
Values	Daily Returns

Ford Motor  vs.  Cofina SGPS SA

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 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.

Cofina SGPS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cofina SGPS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cofina SGPS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and Cofina SGPS

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

The idea behind Ford Motor and Cofina SGPS SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.