Correlation Between Ford and Aristotle Growth

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

Diversification Opportunities for Ford and Aristotle Growth

0.55

Correlation Coefficient

Ford  Aristotle Growth

Very weak diversification

The 3 months correlation between Ford and Aristotle is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aristotle Growth Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle Growth Equity 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 Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle Growth Equity has no effect on the direction of Ford i.e., Ford and Aristotle Growth go up and down completely randomly.

Pair Corralation between Ford and Aristotle Growth

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Aristotle Growth. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.18 times less risky than Aristotle Growth. The stock trades about -0.21 of its potential returns per unit of risk. The Aristotle Growth Equity is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,615  in Aristotle Growth Equity on September 21, 2024 and sell it today you would lose (85.00) from holding Aristotle Growth Equity or give up 5.26% of portfolio value over 90 days.

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

Ford Motor  vs.  Aristotle Growth Equity

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 unfluctuating 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.

Aristotle Growth Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aristotle Growth Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Aristotle Growth 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 Growth

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

The idea behind Ford Motor and Aristotle Growth Equity 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.