Correlation Between Ford and Kangxin New

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

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

Diversification Opportunities for Ford and Kangxin New

0.05

Correlation Coefficient

Ford  Kangxin New

Significant diversification

The 3 months correlation between Ford and Kangxin is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Kangxin New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kangxin New Materials 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 Kangxin New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kangxin New Materials has no effect on the direction of Ford i.e., Ford and Kangxin New go up and down completely randomly.

Pair Corralation between Ford and Kangxin New

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.66 times more return on investment than Kangxin New. However, Ford Motor is 1.52 times less risky than Kangxin New. It trades about 0.04 of its potential returns per unit of risk. Kangxin New Materials is currently generating about 0.02 per unit of risk. If you would invest  957.00  in Ford Motor on December 29, 2024 and sell it today you would earn a total of  33.00  from holding Ford Motor or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Ford Motor  vs.  Kangxin New Materials

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Kangxin New Materials

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kangxin New Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kangxin New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Kangxin New

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

The idea behind Ford Motor and Kangxin New Materials 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.