Correlation Between Ford and American Tower

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

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

Diversification Opportunities for Ford and American Tower

0.16

Correlation Coefficient

Ford  American Tower

Average diversification

The 3 months correlation between Ford and American is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and American Tower Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Tower Corp 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 American Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Tower Corp has no effect on the direction of Ford i.e., Ford and American Tower go up and down completely randomly.

Pair Corralation between Ford and American Tower

Taking into account the 90-day investment horizon Ford is expected to generate 2.12 times less return on investment than American Tower. In addition to that, Ford is 1.27 times more volatile than American Tower Corp. It trades about 0.06 of its total potential returns per unit of risk. American Tower Corp is currently generating about 0.16 per unit of volatility. If you would invest  17,106  in American Tower Corp on December 20, 2024 and sell it today you would earn a total of  2,694  from holding American Tower Corp or generate 15.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  American Tower Corp

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

American Tower Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Tower Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Tower reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and American Tower

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

The idea behind Ford Motor and American Tower Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.