Correlation Between Ford and 361 Domestic

Can any of the company-specific risk be diversified away by investing in both Ford and 361 Domestic 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 361 Domestic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and 361 Domestic Longshort, you can compare the effects of market volatilities on Ford and 361 Domestic 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 361 Domestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and 361 Domestic.

Diversification Opportunities for Ford and 361 Domestic

-0.21

Correlation Coefficient

Ford  361 Domestic

Very good diversification

The 3 months correlation between Ford and 361 is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and 361 Domestic Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 361 Domestic Longshort 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 361 Domestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 361 Domestic Longshort has no effect on the direction of Ford i.e., Ford and 361 Domestic go up and down completely randomly.

Pair Corralation between Ford and 361 Domestic

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the 361 Domestic. In addition to that, Ford is 5.0 times more volatile than 361 Domestic Longshort. It trades about 0.0 of its total potential returns per unit of risk. 361 Domestic Longshort is currently generating about 0.16 per unit of volatility. If you would invest  670.00  in 361 Domestic Longshort on October 9, 2024 and sell it today you would earn a total of  71.00  from holding 361 Domestic Longshort or generate 10.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	56.28%
Values	Daily Returns

Ford Motor  vs.  361 Domestic Longshort

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

361 Domestic Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 361 Domestic Longshort has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, 361 Domestic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and 361 Domestic

The main advantage of trading using opposite Ford and 361 Domestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, 361 Domestic 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 361 Domestic will offset losses from the drop in 361 Domestic's long position.

The idea behind Ford Motor and 361 Domestic Longshort 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.