Correlation Between Ford and Suzhou Industrial

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

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

Diversification Opportunities for Ford and Suzhou Industrial

-0.3

Correlation Coefficient

Ford  Suzhou Industrial

Very good diversification

The 3 months correlation between Ford and Suzhou is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Suzhou Industrial Park in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Industrial Park 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 Suzhou Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Industrial Park has no effect on the direction of Ford i.e., Ford and Suzhou Industrial go up and down completely randomly.

Pair Corralation between Ford and Suzhou Industrial

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Suzhou Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 2.34 times less risky than Suzhou Industrial. The stock trades about -0.05 of its potential returns per unit of risk. The Suzhou Industrial Park is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  942.00  in Suzhou Industrial Park on October 23, 2024 and sell it today you would lose (30.00) from holding Suzhou Industrial Park or give up 3.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  Suzhou Industrial Park

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.

Suzhou Industrial Park

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Ford Motor and Suzhou Industrial Park 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 Global Correlations module to find global opportunities by holding instruments from different markets.