Correlation Between Ford and Fushun Special

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

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

Diversification Opportunities for Ford and Fushun Special

0.28

Correlation Coefficient

Ford  Fushun Special

Modest diversification

The 3 months correlation between Ford and Fushun is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fushun Special Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fushun Special Steel 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 Fushun Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fushun Special Steel has no effect on the direction of Ford i.e., Ford and Fushun Special go up and down completely randomly.

Pair Corralation between Ford and Fushun Special

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.89 times more return on investment than Fushun Special. However, Ford Motor is 1.13 times less risky than Fushun Special. It trades about 0.05 of its potential returns per unit of risk. Fushun Special Steel is currently generating about 0.04 per unit of risk. If you would invest  975.00  in Ford Motor on December 26, 2024 and sell it today you would earn a total of  54.00  from holding Ford Motor or generate 5.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Ford Motor  vs.  Fushun Special Steel

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fushun Special Steel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fushun Special Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fushun Special 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 Fushun Special

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

The idea behind Ford Motor and Fushun Special Steel 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.