Correlation Between Ford and Ryerson Holding

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

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

Diversification Opportunities for Ford and Ryerson Holding

0.5

Correlation Coefficient

Ford  Ryerson Holding

Very weak diversification

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

Pair Corralation between Ford and Ryerson Holding

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Ryerson Holding. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.21 times less risky than Ryerson Holding. The stock trades about -0.16 of its potential returns per unit of risk. The Ryerson Holding is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  2,282  in Ryerson Holding on September 16, 2024 and sell it today you would lose (122.00) from holding Ryerson Holding or give up 5.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Ryerson Holding

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.

Ryerson Holding

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Ford and Ryerson Holding

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

The idea behind Ford Motor and Ryerson Holding 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.