Correlation Between Ford and Bomesc Offshore

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

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

Diversification Opportunities for Ford and Bomesc Offshore

0.29

Correlation Coefficient

Ford  Bomesc Offshore

Modest diversification

The 3 months correlation between Ford and Bomesc is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Bomesc Offshore Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bomesc Offshore Engi 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 Bomesc Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bomesc Offshore Engi has no effect on the direction of Ford i.e., Ford and Bomesc Offshore go up and down completely randomly.

Pair Corralation between Ford and Bomesc Offshore

Taking into account the 90-day investment horizon Ford is expected to generate 4.59 times less return on investment than Bomesc Offshore. In addition to that, Ford is 1.05 times more volatile than Bomesc Offshore Engineering. It trades about 0.04 of its total potential returns per unit of risk. Bomesc Offshore Engineering is currently generating about 0.18 per unit of volatility. If you would invest  1,167  in Bomesc Offshore Engineering on December 29, 2024 and sell it today you would earn a total of  248.00  from holding Bomesc Offshore Engineering or generate 21.25% return on investment over 90 days.

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

Ford Motor  vs.  Bomesc Offshore Engineering

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.

Bomesc Offshore Engi

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bomesc Offshore Engineering are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bomesc Offshore sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Bomesc Offshore

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

The idea behind Ford Motor and Bomesc Offshore Engineering 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.