Correlation Between Ford and Atlas Copco

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

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

Diversification Opportunities for Ford and Atlas Copco

0.12

Correlation Coefficient

Ford  Atlas Copco

Average diversification

The 3 months correlation between Ford and Atlas is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Atlas Copco ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco ADR 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 Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco ADR has no effect on the direction of Ford i.e., Ford and Atlas Copco go up and down completely randomly.

Pair Corralation between Ford and Atlas Copco

Taking into account the 90-day investment horizon Ford is expected to generate 1.46 times less return on investment than Atlas Copco. In addition to that, Ford is 1.03 times more volatile than Atlas Copco ADR. It trades about 0.05 of its total potential returns per unit of risk. Atlas Copco ADR is currently generating about 0.08 per unit of volatility. If you would invest  1,364  in Atlas Copco ADR on December 26, 2024 and sell it today you would earn a total of  121.00  from holding Atlas Copco ADR or generate 8.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Ford Motor  vs.  Atlas Copco ADR

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Atlas Copco ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Copco ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Atlas Copco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ford and Atlas Copco

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

The idea behind Ford Motor and Atlas Copco ADR 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.