Correlation Between Ford and Albemarle Corp

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

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

Diversification Opportunities for Ford and Albemarle Corp

0.51

Correlation Coefficient

Ford  Albemarle Corp

Very weak diversification

The 3 months correlation between Ford and Albemarle is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Albemarle Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle Corp 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 Albemarle Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle Corp has no effect on the direction of Ford i.e., Ford and Albemarle Corp go up and down completely randomly.

Pair Corralation between Ford and Albemarle Corp

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.65 times more return on investment than Albemarle Corp. However, Ford Motor is 1.53 times less risky than Albemarle Corp. It trades about 0.0 of its potential returns per unit of risk. Albemarle Corp is currently generating about -0.05 per unit of risk. If you would invest  1,119  in Ford Motor on October 25, 2024 and sell it today you would lose (116.00) from holding Ford Motor or give up 10.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.8%
Values	Daily Returns

Ford Motor  vs.  Albemarle Corp

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 unfluctuating 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.

Albemarle Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Albemarle Corp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Albemarle Corp

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

The idea behind Ford Motor and Albemarle Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.