Correlation Between Ford and Chinese Gamer

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

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

Diversification Opportunities for Ford and Chinese Gamer

0.54

Correlation Coefficient

Ford  Chinese Gamer

Very weak diversification

The 3 months correlation between Ford and Chinese is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Chinese Gamer International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Gamer Intern 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 Chinese Gamer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Gamer Intern has no effect on the direction of Ford i.e., Ford and Chinese Gamer go up and down completely randomly.

Pair Corralation between Ford and Chinese Gamer

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Chinese Gamer. In addition to that, Ford is 1.57 times more volatile than Chinese Gamer International. It trades about -0.09 of its total potential returns per unit of risk. Chinese Gamer International is currently generating about -0.08 per unit of volatility. If you would invest  4,500  in Chinese Gamer International on December 2, 2024 and sell it today you would lose (250.00) from holding Chinese Gamer International or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.44%
Values	Daily Returns

Ford Motor  vs.  Chinese Gamer International

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Chinese Gamer Intern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chinese Gamer International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chinese Gamer 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 Chinese Gamer

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

The idea behind Ford Motor and Chinese Gamer International 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.