Correlation Between Ford and Alkemy Capital

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

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

Diversification Opportunities for Ford and Alkemy Capital

-0.23

Correlation Coefficient

Ford  Alkemy Capital

Very good diversification

The 3 months correlation between Ford and Alkemy is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Alkemy Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkemy Capital Inves 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 Alkemy Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkemy Capital Inves has no effect on the direction of Ford i.e., Ford and Alkemy Capital go up and down completely randomly.

Pair Corralation between Ford and Alkemy Capital

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Alkemy Capital. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 3.16 times less risky than Alkemy Capital. The stock trades about 0.0 of its potential returns per unit of risk. The Alkemy Capital Investments is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  25,000  in Alkemy Capital Investments on October 3, 2024 and sell it today you would lose (12,250) from holding Alkemy Capital Investments or give up 49.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Ford Motor  vs.  Alkemy Capital Investments

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.

Alkemy Capital Inves

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alkemy Capital Investments are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Alkemy Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Alkemy Capital

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

The idea behind Ford Motor and Alkemy Capital Investments 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.