Correlation Between Ford and Aeries Technology

Can any of the company-specific risk be diversified away by investing in both Ford and Aeries 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 Aeries 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 Aeries Technology, you can compare the effects of market volatilities on Ford and Aeries 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 Aeries Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Aeries Technology.

Diversification Opportunities for Ford and Aeries Technology

0.22

Correlation Coefficient

Ford  Aeries Technology

Modest diversification

The 3 months correlation between Ford and Aeries is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aeries Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeries 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 Aeries Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeries Technology has no effect on the direction of Ford i.e., Ford and Aeries Technology go up and down completely randomly.

Pair Corralation between Ford and Aeries Technology

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Aeries Technology. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 12.12 times less risky than Aeries Technology. The stock trades about -0.22 of its potential returns per unit of risk. The Aeries Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  76.00  in Aeries Technology on October 8, 2024 and sell it today you would earn a total of  13.00  from holding Aeries Technology or generate 17.11% return on investment over 90 days.

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

Ford Motor  vs.  Aeries Technology

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.

Aeries Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeries Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ford and Aeries Technology

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

The idea behind Ford Motor and Aeries Technology 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.