Correlation Between Ford and Silitech Technology

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

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

Diversification Opportunities for Ford and Silitech Technology

0.26

Correlation Coefficient

Ford  Silitech Technology

Modest diversification

The 3 months correlation between Ford and Silitech is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Silitech Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silitech Technology Corp 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 Silitech Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silitech Technology Corp has no effect on the direction of Ford i.e., Ford and Silitech Technology go up and down completely randomly.

Pair Corralation between Ford and Silitech Technology

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Silitech Technology. In addition to that, Ford is 1.83 times more volatile than Silitech Technology Corp. It trades about -0.05 of its total potential returns per unit of risk. Silitech Technology Corp is currently generating about -0.07 per unit of volatility. If you would invest  3,950  in Silitech Technology Corp on September 26, 2024 and sell it today you would lose (475.00) from holding Silitech Technology Corp or give up 12.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Ford Motor  vs.  Silitech Technology Corp

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.

Silitech Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silitech Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ford and Silitech Technology

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

The idea behind Ford Motor and Silitech Technology Corp 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.