Correlation Between Ford and Aspo Oyj

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

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

Diversification Opportunities for Ford and Aspo Oyj

0.52

Correlation Coefficient

Ford  Aspo Oyj

Very weak diversification

The 3 months correlation between Ford and Aspo is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aspo Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspo Oyj 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 Aspo Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspo Oyj has no effect on the direction of Ford i.e., Ford and Aspo Oyj go up and down completely randomly.

Pair Corralation between Ford and Aspo Oyj

Taking into account the 90-day investment horizon Ford is expected to generate 1.1 times less return on investment than Aspo Oyj. But when comparing it to its historical volatility, Ford Motor is 1.03 times less risky than Aspo Oyj. It trades about 0.13 of its potential returns per unit of risk. Aspo Oyj is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  474.00  in Aspo Oyj on October 24, 2024 and sell it today you would earn a total of  14.00  from holding Aspo Oyj or generate 2.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Ford Motor  vs.  Aspo Oyj

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.

Aspo Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspo Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ford and Aspo Oyj

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

The idea behind Ford Motor and Aspo Oyj 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.