Correlation Between Ford and Air Link

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

Diversification Opportunities for Ford and Air Link

-0.55

Correlation Coefficient

Ford  Air Link

Excellent diversification

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

Pair Corralation between Ford and Air Link

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.09 times more return on investment than Air Link. However, Ford is 1.09 times more volatile than Air Link Communication. It trades about -0.1 of its potential returns per unit of risk. Air Link Communication is currently generating about -0.24 per unit of risk. If you would invest  958.00  in Ford Motor on December 4, 2024 and sell it today you would lose (45.50) from holding Ford Motor or give up 4.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  Air Link Communication

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Air Link Communication

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Link Communication are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Air Link may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ford and Air Link

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

The idea behind Ford Motor and Air Link Communication 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.