Correlation Between Ford and Xxentria Technology

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

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

Diversification Opportunities for Ford and Xxentria Technology

-0.3

Correlation Coefficient

Ford  Xxentria Technology

Very good diversification

The 3 months correlation between Ford and Xxentria is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Xxentria Technology Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xxentria Technology 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 Xxentria Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xxentria Technology has no effect on the direction of Ford i.e., Ford and Xxentria Technology go up and down completely randomly.

Pair Corralation between Ford and Xxentria Technology

Taking into account the 90-day investment horizon Ford is expected to generate 87.18 times less return on investment than Xxentria Technology. But when comparing it to its historical volatility, Ford Motor is 20.35 times less risky than Xxentria Technology. It trades about 0.01 of its potential returns per unit of risk. Xxentria Technology Materials is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,410  in Xxentria Technology Materials on September 21, 2024 and sell it today you would earn a total of  1,060  from holding Xxentria Technology Materials or generate 24.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Ford Motor  vs.  Xxentria Technology Materials

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Xxentria Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xxentria Technology Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ford and Xxentria Technology

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

The idea behind Ford Motor and Xxentria Technology Materials 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.