Correlation Between Ford and Chialin Precision

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

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

Diversification Opportunities for Ford and Chialin Precision

-0.68

Correlation Coefficient

Ford  Chialin Precision

Excellent diversification

The 3 months correlation between Ford and Chialin is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Chialin Precision Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chialin Precision 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 Chialin Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chialin Precision has no effect on the direction of Ford i.e., Ford and Chialin Precision go up and down completely randomly.

Pair Corralation between Ford and Chialin Precision

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Chialin Precision. In addition to that, Ford is 3.02 times more volatile than Chialin Precision Industrial. It trades about -0.22 of its total potential returns per unit of risk. Chialin Precision Industrial is currently generating about 0.67 per unit of volatility. If you would invest  9,000  in Chialin Precision Industrial on October 8, 2024 and sell it today you would earn a total of  620.00  from holding Chialin Precision Industrial or generate 6.89% return on investment over 90 days.

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

Ford Motor  vs.  Chialin Precision Industrial

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.

Chialin Precision

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chialin Precision Industrial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chialin Precision showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Chialin Precision

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

The idea behind Ford Motor and Chialin Precision Industrial 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.