Correlation Between Ford and XIAO I

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

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

Diversification Opportunities for Ford and XIAO I

0.12

Correlation Coefficient

Ford  XIAO I

Average diversification

The 3 months correlation between Ford and XIAO is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and XIAO I American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XIAO I American 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 XIAO I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XIAO I American has no effect on the direction of Ford i.e., Ford and XIAO I go up and down completely randomly.

Pair Corralation between Ford and XIAO I

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the XIAO I. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 4.5 times less risky than XIAO I. The stock trades about 0.0 of its potential returns per unit of risk. The XIAO I American is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  404.00  in XIAO I American on September 13, 2024 and sell it today you would earn a total of  162.00  from holding XIAO I American or generate 40.1% return on investment over 90 days.

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

Ford Motor  vs.  XIAO I American

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.

XIAO I American

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XIAO I American are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, XIAO I demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and XIAO I

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

The idea behind Ford Motor and XIAO I American 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.