Correlation Between Ford and Aristotle Funds

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

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

Diversification Opportunities for Ford and Aristotle Funds

0.6

Correlation Coefficient

Ford  Aristotle Funds

Poor diversification

The 3 months correlation between Ford and Aristotle is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aristotle Funds Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle Funds Series 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 Aristotle Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle Funds Series has no effect on the direction of Ford i.e., Ford and Aristotle Funds go up and down completely randomly.

Pair Corralation between Ford and Aristotle Funds

Taking into account the 90-day investment horizon Ford is expected to generate 2.52 times less return on investment than Aristotle Funds. In addition to that, Ford is 2.03 times more volatile than Aristotle Funds Series. It trades about 0.01 of its total potential returns per unit of risk. Aristotle Funds Series is currently generating about 0.03 per unit of volatility. If you would invest  1,377  in Aristotle Funds Series on September 30, 2024 and sell it today you would earn a total of  179.00  from holding Aristotle Funds Series or generate 13.0% return on investment over 90 days.

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

Ford Motor  vs.  Aristotle Funds Series

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.

Aristotle Funds Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aristotle Funds Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Aristotle Funds 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 Aristotle Funds

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

The idea behind Ford Motor and Aristotle Funds Series 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.