Correlation Between Ford and Adobe

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

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

Diversification Opportunities for Ford and Adobe

0.5

Correlation Coefficient

Ford  Adobe

Very weak diversification

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

Pair Corralation between Ford and Adobe

Taking into account the 90-day investment horizon Ford is expected to generate 7.66 times less return on investment than Adobe. In addition to that, Ford is 1.04 times more volatile than Adobe Inc. It trades about 0.0 of its total potential returns per unit of risk. Adobe Inc is currently generating about 0.04 per unit of volatility. If you would invest  32,090  in Adobe Inc on October 8, 2024 and sell it today you would earn a total of  9,695  from holding Adobe Inc or generate 30.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.0%
Values	Daily Returns

Ford Motor  vs.  Adobe Inc

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.

Adobe Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ford and Adobe

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

The idea behind Ford Motor and Adobe Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.