Correlation Between Ford and Asiaplast Industries

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

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

Diversification Opportunities for Ford and Asiaplast Industries

-0.44

Correlation Coefficient

Ford  Asiaplast Industries

Very good diversification

The 3 months correlation between Ford and Asiaplast is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Asiaplast Industries Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiaplast Industries Tbk 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 Asiaplast Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiaplast Industries Tbk has no effect on the direction of Ford i.e., Ford and Asiaplast Industries go up and down completely randomly.

Pair Corralation between Ford and Asiaplast Industries

Taking into account the 90-day investment horizon Ford is expected to generate 2.09 times less return on investment than Asiaplast Industries. But when comparing it to its historical volatility, Ford Motor is 1.59 times less risky than Asiaplast Industries. It trades about 0.03 of its potential returns per unit of risk. Asiaplast Industries Tbk is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  57,000  in Asiaplast Industries Tbk on September 3, 2024 and sell it today you would earn a total of  3,000  from holding Asiaplast Industries Tbk or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Ford Motor  vs.  Asiaplast Industries Tbk

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Asiaplast Industries Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asiaplast Industries Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Asiaplast Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and Asiaplast Industries

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

The idea behind Ford Motor and Asiaplast Industries Tbk 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.