Correlation Between Ford and Acticor Biotech

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

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

Diversification Opportunities for Ford and Acticor Biotech

-0.27

Correlation Coefficient

Ford  Acticor Biotech

Very good diversification

The 3 months correlation between Ford and Acticor is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Acticor Biotech SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acticor Biotech SAS 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 Acticor Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acticor Biotech SAS has no effect on the direction of Ford i.e., Ford and Acticor Biotech go up and down completely randomly.

Pair Corralation between Ford and Acticor Biotech

Taking into account the 90-day investment horizon Ford is expected to generate 8.05 times less return on investment than Acticor Biotech. But when comparing it to its historical volatility, Ford Motor is 7.75 times less risky than Acticor Biotech. It trades about 0.03 of its potential returns per unit of risk. Acticor Biotech SAS is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Acticor Biotech SAS on September 3, 2024 and sell it today you would lose (13.00) from holding Acticor Biotech SAS or give up 30.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  Acticor Biotech SAS

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Acticor Biotech SAS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Acticor Biotech SAS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Acticor Biotech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Acticor Biotech

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

The idea behind Ford Motor and Acticor Biotech SAS 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.