Correlation Between Ford and AurosTechnology

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

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

Diversification Opportunities for Ford and AurosTechnology

-0.41

Correlation Coefficient

Ford  AurosTechnology

Very good diversification

The 3 months correlation between Ford and AurosTechnology is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AurosTechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AurosTechnology 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 AurosTechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AurosTechnology has no effect on the direction of Ford i.e., Ford and AurosTechnology go up and down completely randomly.

Pair Corralation between Ford and AurosTechnology

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.6 times more return on investment than AurosTechnology. However, Ford Motor is 1.65 times less risky than AurosTechnology. It trades about 0.03 of its potential returns per unit of risk. AurosTechnology is currently generating about -0.12 per unit of risk. If you would invest  1,083  in Ford Motor on September 2, 2024 and sell it today you would earn a total of  30.00  from holding Ford Motor or generate 2.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

Ford Motor  vs.  AurosTechnology

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

AurosTechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AurosTechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ford and AurosTechnology

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

The idea behind Ford Motor and AurosTechnology 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 CEOs Directory module to screen CEOs from public companies around the world.