Correlation Between Ford and GAEC Educacao

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

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

Diversification Opportunities for Ford and GAEC Educacao

0.64

Correlation Coefficient

Ford  GAEC Educacao

Poor diversification

The 3 months correlation between Ford and GAEC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and GAEC Educacao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAEC Educacao SA 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 GAEC Educacao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAEC Educacao SA has no effect on the direction of Ford i.e., Ford and GAEC Educacao go up and down completely randomly.

Pair Corralation between Ford and GAEC Educacao

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.5 times more return on investment than GAEC Educacao. However, Ford Motor is 2.02 times less risky than GAEC Educacao. It trades about -0.02 of its potential returns per unit of risk. GAEC Educacao SA is currently generating about -0.02 per unit of risk. If you would invest  1,254  in Ford Motor on October 3, 2024 and sell it today you would lose (264.00) from holding Ford Motor or give up 21.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.24%
Values	Daily Returns

Ford Motor  vs.  GAEC Educacao SA

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.

GAEC Educacao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAEC Educacao SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ford and GAEC Educacao

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

The idea behind Ford Motor and GAEC Educacao SA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.