Correlation Between Ford and Neway Valve

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

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

Diversification Opportunities for Ford and Neway Valve

-0.39

Correlation Coefficient

Ford  Neway Valve

Very good diversification

The 3 months correlation between Ford and Neway is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Neway Valve suzhou in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neway Valve suzhou 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 Neway Valve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neway Valve suzhou has no effect on the direction of Ford i.e., Ford and Neway Valve go up and down completely randomly.

Pair Corralation between Ford and Neway Valve

Taking into account the 90-day investment horizon Ford is expected to generate 3.28 times less return on investment than Neway Valve. But when comparing it to its historical volatility, Ford Motor is 1.3 times less risky than Neway Valve. It trades about 0.06 of its potential returns per unit of risk. Neway Valve suzhou is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,172  in Neway Valve suzhou on December 19, 2024 and sell it today you would earn a total of  458.00  from holding Neway Valve suzhou or generate 21.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Ford Motor  vs.  Neway Valve suzhou

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.

Neway Valve suzhou

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neway Valve suzhou are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Neway Valve sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Neway Valve

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

The idea behind Ford Motor and Neway Valve suzhou 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.