Correlation Between Ford and Everest Textile

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

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

Diversification Opportunities for Ford and Everest Textile

-0.2

Correlation Coefficient

Ford  Everest Textile

Good diversification

The 3 months correlation between Ford and Everest is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Everest Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everest Textile 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 Everest Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everest Textile has no effect on the direction of Ford i.e., Ford and Everest Textile go up and down completely randomly.

Pair Corralation between Ford and Everest Textile

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Everest Textile. In addition to that, Ford is 1.67 times more volatile than Everest Textile Co. It trades about -0.31 of its total potential returns per unit of risk. Everest Textile Co is currently generating about -0.02 per unit of volatility. If you would invest  707.00  in Everest Textile Co on September 17, 2024 and sell it today you would lose (4.00) from holding Everest Textile Co or give up 0.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Everest Textile Co

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.

Everest Textile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everest Textile Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Everest Textile is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ford and Everest Textile

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

The idea behind Ford Motor and Everest Textile Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.