Correlation Between Ford and MetaTech

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

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

Diversification Opportunities for Ford and MetaTech

0.02

Correlation Coefficient

Ford  MetaTech

Significant diversification

The 3 months correlation between Ford and MetaTech is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and MetaTech AP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetaTech AP 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 MetaTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetaTech AP has no effect on the direction of Ford i.e., Ford and MetaTech go up and down completely randomly.

Pair Corralation between Ford and MetaTech

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.79 times more return on investment than MetaTech. However, Ford Motor is 1.27 times less risky than MetaTech. It trades about 0.19 of its potential returns per unit of risk. MetaTech AP is currently generating about -0.09 per unit of risk. If you would invest  974.00  in Ford Motor on October 20, 2024 and sell it today you would earn a total of  44.00  from holding Ford Motor or generate 4.52% return on investment over 90 days.

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

Ford Motor  vs.  MetaTech AP

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.

MetaTech AP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MetaTech AP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, MetaTech 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 MetaTech

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

The idea behind Ford Motor and MetaTech AP 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.