Correlation Between Ford and Alpha Healthcare

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

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

Diversification Opportunities for Ford and Alpha Healthcare

0.03

Correlation Coefficient

Ford  Alpha Healthcare

Significant diversification

The 3 months correlation between Ford and Alpha is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Alpha Healthcare Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Healthcare Acq 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 Alpha Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Healthcare Acq has no effect on the direction of Ford i.e., Ford and Alpha Healthcare go up and down completely randomly.

Pair Corralation between Ford and Alpha Healthcare

Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.1 times more return on investment than Alpha Healthcare. However, Ford is 2.1 times more volatile than Alpha Healthcare Acquisition. It trades about 0.01 of its potential returns per unit of risk. Alpha Healthcare Acquisition is currently generating about -0.01 per unit of risk. If you would invest  1,030  in Ford Motor on October 10, 2024 and sell it today you would lose (54.00) from holding Ford Motor or give up 5.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	24.85%
Values	Daily Returns

Ford Motor  vs.  Alpha Healthcare Acquisition

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Alpha Healthcare Acq

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Healthcare Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alpha Healthcare is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Alpha Healthcare

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

The idea behind Ford Motor and Alpha Healthcare Acquisition 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.