Correlation Between Ford and Anhui Conch

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Can any of the company-specific risk be diversified away by investing in both Ford and Anhui Conch 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 Anhui Conch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Anhui Conch Cement, you can compare the effects of market volatilities on Ford and Anhui Conch 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 Anhui Conch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Anhui Conch.

Diversification Opportunities for Ford and Anhui Conch

-0.03
  Correlation Coefficient

Good diversification

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

Pair Corralation between Ford and Anhui Conch

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Anhui Conch. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.49 times less risky than Anhui Conch. The stock trades about -0.04 of its potential returns per unit of risk. The Anhui Conch Cement is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  221.00  in Anhui Conch Cement on September 23, 2024 and sell it today you would earn a total of  13.00  from holding Anhui Conch Cement or generate 5.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy97.69%
ValuesDaily Returns

Ford Motor  vs.  Anhui Conch Cement

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Anhui Conch Cement 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Conch Cement are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Anhui Conch reported solid returns over the last few months and may actually be approaching a breakup point.

Ford and Anhui Conch Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Anhui Conch

The main advantage of trading using opposite Ford and Anhui Conch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Anhui Conch 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 Anhui Conch will offset losses from the drop in Anhui Conch's long position.
The idea behind Ford Motor and Anhui Conch Cement 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.
Check out your portfolio center.
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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