Correlation Between Ford and Wankai New

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

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

Diversification Opportunities for Ford and Wankai New

0.4

Correlation Coefficient

Ford  Wankai New

Very weak diversification

The 3 months correlation between Ford and Wankai is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Wankai New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wankai New Materials 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 Wankai New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wankai New Materials has no effect on the direction of Ford i.e., Ford and Wankai New go up and down completely randomly.

Pair Corralation between Ford and Wankai New

Taking into account the 90-day investment horizon Ford is expected to generate 5.16 times less return on investment than Wankai New. But when comparing it to its historical volatility, Ford Motor is 1.02 times less risky than Wankai New. It trades about 0.05 of its potential returns per unit of risk. Wankai New Materials is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,030  in Wankai New Materials on December 26, 2024 and sell it today you would earn a total of  376.00  from holding Wankai New Materials or generate 36.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Ford Motor  vs.  Wankai New Materials

Ford Motor

Risk-Adjusted Performance

Insignificant

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.

Wankai New Materials

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wankai New Materials are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wankai New sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Wankai New

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

The idea behind Ford Motor and Wankai New Materials 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.