Correlation Between Ford and Yeong Guan

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

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

Diversification Opportunities for Ford and Yeong Guan

-0.19

Correlation Coefficient

Ford  Yeong Guan

Good diversification

The 3 months correlation between Ford and Yeong is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Yeong Guan Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yeong Guan Energy 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 Yeong Guan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yeong Guan Energy has no effect on the direction of Ford i.e., Ford and Yeong Guan go up and down completely randomly.

Pair Corralation between Ford and Yeong Guan

Taking into account the 90-day investment horizon Ford is expected to generate 1.55 times less return on investment than Yeong Guan. In addition to that, Ford is 1.18 times more volatile than Yeong Guan Energy. It trades about 0.06 of its total potential returns per unit of risk. Yeong Guan Energy is currently generating about 0.1 per unit of volatility. If you would invest  3,655  in Yeong Guan Energy on December 24, 2024 and sell it today you would earn a total of  335.00  from holding Yeong Guan Energy or generate 9.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.8%
Values	Daily Returns

Ford Motor  vs.  Yeong Guan Energy

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Yeong Guan Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yeong Guan Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yeong Guan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ford and Yeong Guan

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

The idea behind Ford Motor and Yeong Guan Energy 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.