Correlation Between Ford and Alliance Global

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

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

Diversification Opportunities for Ford and Alliance Global

0.19

Correlation Coefficient

Ford  Alliance Global

Average diversification

The 3 months correlation between Ford and Alliance is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Alliance Global Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Global Group 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 Alliance Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Global Group has no effect on the direction of Ford i.e., Ford and Alliance Global go up and down completely randomly.

Pair Corralation between Ford and Alliance Global

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.3 times more return on investment than Alliance Global. However, Ford is 1.3 times more volatile than Alliance Global Group. It trades about 0.0 of its potential returns per unit of risk. Alliance Global Group is currently generating about -0.03 per unit of risk. If you would invest  1,083  in Ford Motor on October 12, 2024 and sell it today you would lose (118.00) from holding Ford Motor or give up 10.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.97%
Values	Daily Returns

Ford Motor  vs.  Alliance Global Group

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Alliance Global Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Global Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Alliance Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and Alliance Global

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

The idea behind Ford Motor and Alliance Global Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.