Correlation Between Ford and GUOTAI JUNAN

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

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

Diversification Opportunities for Ford and GUOTAI JUNAN

0.06

Correlation Coefficient

Ford  GUOTAI JUNAN

Significant diversification

The 3 months correlation between Ford and GUOTAI is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and GUOTAI JUNAN SEC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUOTAI JUNAN SEC 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 GUOTAI JUNAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUOTAI JUNAN SEC has no effect on the direction of Ford i.e., Ford and GUOTAI JUNAN go up and down completely randomly.

Pair Corralation between Ford and GUOTAI JUNAN

Taking into account the 90-day investment horizon Ford is expected to generate 32.24 times less return on investment than GUOTAI JUNAN. But when comparing it to its historical volatility, Ford Motor is 2.69 times less risky than GUOTAI JUNAN. It trades about 0.01 of its potential returns per unit of risk. GUOTAI JUNAN SEC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  25.00  in GUOTAI JUNAN SEC on October 9, 2024 and sell it today you would earn a total of  103.00  from holding GUOTAI JUNAN SEC or generate 412.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.8%
Values	Daily Returns

Ford Motor  vs.  GUOTAI JUNAN SEC

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

GUOTAI JUNAN SEC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GUOTAI JUNAN SEC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GUOTAI JUNAN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and GUOTAI JUNAN

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

The idea behind Ford Motor and GUOTAI JUNAN SEC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.