Correlation Between Ford and Energisme

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

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

Diversification Opportunities for Ford and Energisme

0.3

Correlation Coefficient

Ford  Energisme

Weak diversification

The 3 months correlation between Ford and Energisme is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Energisme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisme 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 Energisme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energisme has no effect on the direction of Ford i.e., Ford and Energisme go up and down completely randomly.

Pair Corralation between Ford and Energisme

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Energisme. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 2.36 times less risky than Energisme. The stock trades about -0.02 of its potential returns per unit of risk. The Energisme is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  0.56  in Energisme on September 29, 2024 and sell it today you would lose (0.03) from holding Energisme or give up 5.36% of portfolio value over 90 days.

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

Ford Motor  vs.  Energisme

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.

Energisme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energisme has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Energisme is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ford and Energisme

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

The idea behind Ford Motor and Energisme 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 Global Correlations module to find global opportunities by holding instruments from different markets.