Correlation Between Ford and Ningbo Bird

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

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

Diversification Opportunities for Ford and Ningbo Bird

0.06

Correlation Coefficient

Ford  Ningbo Bird

Significant diversification

The 3 months correlation between Ford and Ningbo is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ningbo Bird Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Bird 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 Ningbo Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Bird has no effect on the direction of Ford i.e., Ford and Ningbo Bird go up and down completely randomly.

Pair Corralation between Ford and Ningbo Bird

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Ningbo Bird. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.68 times less risky than Ningbo Bird. The stock trades about -0.01 of its potential returns per unit of risk. The Ningbo Bird Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  458.00  in Ningbo Bird Co on October 7, 2024 and sell it today you would lose (17.00) from holding Ningbo Bird Co or give up 3.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.97%
Values	Daily Returns

Ford Motor  vs.  Ningbo Bird Co

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.

Ningbo Bird

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Bird Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ningbo Bird 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 Ningbo Bird

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

The idea behind Ford Motor and Ningbo Bird Co 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.