Correlation Between Ford and Absolute Strategies

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

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

Diversification Opportunities for Ford and Absolute Strategies

-0.1

Correlation Coefficient

Ford  Absolute Strategies

Good diversification

The 3 months correlation between Ford and Absolute is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Absolute Strategies Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Strategies 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 Absolute Strategies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Strategies has no effect on the direction of Ford i.e., Ford and Absolute Strategies go up and down completely randomly.

Pair Corralation between Ford and Absolute Strategies

If you would invest  597.00  in Absolute Strategies Fund on September 28, 2024 and sell it today you would earn a total of  0.00  from holding Absolute Strategies Fund or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Ford Motor  vs.  Absolute Strategies Fund

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.

Absolute Strategies

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Absolute Strategies Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Absolute Strategies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Absolute Strategies

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

The idea behind Ford Motor and Absolute Strategies Fund 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.