Correlation Between Ford and Kawan Food

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

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

Diversification Opportunities for Ford and Kawan Food

-0.4

Correlation Coefficient

Ford  Kawan Food

Very good diversification

The 3 months correlation between Ford and Kawan is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Kawan Food Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawan Food 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 Kawan Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawan Food Bhd has no effect on the direction of Ford i.e., Ford and Kawan Food go up and down completely randomly.

Pair Corralation between Ford and Kawan Food

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.46 times more return on investment than Kawan Food. However, Ford is 1.46 times more volatile than Kawan Food Bhd. It trades about 0.04 of its potential returns per unit of risk. Kawan Food Bhd is currently generating about -0.12 per unit of risk. If you would invest  957.00  in Ford Motor on December 28, 2024 and sell it today you would earn a total of  33.00  from holding Ford Motor or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Ford Motor  vs.  Kawan Food Bhd

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Kawan Food Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kawan Food Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Ford and Kawan Food

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

The idea behind Ford Motor and Kawan Food 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.