Correlation Between Ford and Air Liquide

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

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

Diversification Opportunities for Ford and Air Liquide

0.39

Correlation Coefficient

Ford  Air Liquide

Weak diversification

The 3 months correlation between Ford and Air is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Air Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Liquide SA 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 Air Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Liquide SA has no effect on the direction of Ford i.e., Ford and Air Liquide go up and down completely randomly.

Pair Corralation between Ford and Air Liquide

Taking into account the 90-day investment horizon Ford is expected to generate 1.84 times less return on investment than Air Liquide. In addition to that, Ford is 1.4 times more volatile than Air Liquide SA. It trades about 0.13 of its total potential returns per unit of risk. Air Liquide SA is currently generating about 0.33 per unit of volatility. If you would invest  15,492  in Air Liquide SA on October 22, 2024 and sell it today you would earn a total of  752.00  from holding Air Liquide SA or generate 4.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.47%
Values	Daily Returns

Ford Motor  vs.  Air Liquide SA

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.

Air Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Air Liquide is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and Air Liquide

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

The idea behind Ford Motor and Air Liquide SA 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.