Correlation Between Ford and 475050

Can any of the company-specific risk be diversified away by investing in both Ford and 475050 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 475050 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and 475050, you can compare the effects of market volatilities on Ford and 475050 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 475050. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and 475050.

Diversification Opportunities for Ford and 475050

0.09

Correlation Coefficient

Ford  475050

Significant diversification

The 3 months correlation between Ford and 475050 is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and 475050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 475050 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 475050. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 475050 has no effect on the direction of Ford i.e., Ford and 475050 go up and down completely randomly.

Pair Corralation between Ford and 475050

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the 475050. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.77 times less risky than 475050. The stock trades about -0.5 of its potential returns per unit of risk. The 475050 is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  852,000  in 475050 on September 25, 2024 and sell it today you would lose (23,000) from holding 475050 or give up 2.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Ford Motor  vs.  475050

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.

475050

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 475050 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 475050 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and 475050

The main advantage of trading using opposite Ford and 475050 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, 475050 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 475050 will offset losses from the drop in 475050's long position.

The idea behind Ford Motor and 475050 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.