Correlation Between Ford and China CYTS

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

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

Diversification Opportunities for Ford and China CYTS

-0.11

Correlation Coefficient

Ford  China CYTS

Good diversification

The 3 months correlation between Ford and China is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and China CYTS Tours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China CYTS Tours 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 China CYTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China CYTS Tours has no effect on the direction of Ford i.e., Ford and China CYTS go up and down completely randomly.

Pair Corralation between Ford and China CYTS

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.9 times more return on investment than China CYTS. However, Ford Motor is 1.12 times less risky than China CYTS. It trades about -0.2 of its potential returns per unit of risk. China CYTS Tours is currently generating about -0.21 per unit of risk. If you would invest  1,051  in Ford Motor on October 7, 2024 and sell it today you would lose (63.00) from holding Ford Motor or give up 5.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  China CYTS Tours

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.

China CYTS Tours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China CYTS Tours has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ford and China CYTS

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

The idea behind Ford Motor and China CYTS Tours 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.