Correlation Between Ford and Pentamaster Bhd

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

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

Diversification Opportunities for Ford and Pentamaster Bhd

-0.5

Correlation Coefficient

Ford  Pentamaster Bhd

Very good diversification

The 3 months correlation between Ford and Pentamaster is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Pentamaster Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentamaster Bhd 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 Pentamaster Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentamaster Bhd has no effect on the direction of Ford i.e., Ford and Pentamaster Bhd go up and down completely randomly.

Pair Corralation between Ford and Pentamaster Bhd

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Pentamaster Bhd. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.18 times less risky than Pentamaster Bhd. The stock trades about -0.05 of its potential returns per unit of risk. The Pentamaster Bhd is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Pentamaster Bhd on September 27, 2024 and sell it today you would lose (84.00) from holding Pentamaster Bhd or give up 16.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Ford Motor  vs.  Pentamaster Bhd

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.

Pentamaster Bhd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pentamaster Bhd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Pentamaster Bhd disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Pentamaster Bhd

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

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