Correlation Between Ford and Asiabasemetals

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

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

Diversification Opportunities for Ford and Asiabasemetals

-0.45

Correlation Coefficient

Ford  Asiabasemetals

Very good diversification

The 3 months correlation between Ford and Asiabasemetals is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Asiabasemetals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiabasemetals 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 Asiabasemetals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiabasemetals has no effect on the direction of Ford i.e., Ford and Asiabasemetals go up and down completely randomly.

Pair Corralation between Ford and Asiabasemetals

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.33 times more return on investment than Asiabasemetals. However, Ford Motor is 3.06 times less risky than Asiabasemetals. It trades about 0.04 of its potential returns per unit of risk. Asiabasemetals is currently generating about -0.05 per unit of risk. If you would invest  959.00  in Ford Motor on December 23, 2024 and sell it today you would earn a total of  41.00  from holding Ford Motor or generate 4.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Asiabasemetals

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) 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.

Asiabasemetals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asiabasemetals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Ford and Asiabasemetals

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

The idea behind Ford Motor and Asiabasemetals 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..