Correlation Between Ford and Shining Building

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

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

Diversification Opportunities for Ford and Shining Building

0.46

Correlation Coefficient

Ford  Shining Building

Very weak diversification

The 3 months correlation between Ford and Shining is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Shining Building Business in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shining Building Business 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 Shining Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shining Building Business has no effect on the direction of Ford i.e., Ford and Shining Building go up and down completely randomly.

Pair Corralation between Ford and Shining Building

Taking into account the 90-day investment horizon Ford is expected to generate 4.3 times less return on investment than Shining Building. But when comparing it to its historical volatility, Ford Motor is 1.05 times less risky than Shining Building. It trades about 0.0 of its potential returns per unit of risk. Shining Building Business is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  917.00  in Shining Building Business on October 11, 2024 and sell it today you would earn a total of  83.00  from holding Shining Building Business or generate 9.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.17%
Values	Daily Returns

Ford Motor  vs.  Shining Building Business

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Shining Building Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shining Building Business has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shining Building 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 Shining Building

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

The idea behind Ford Motor and Shining Building Business 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.