Correlation Between Ford and Schroders Investment

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

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

Diversification Opportunities for Ford and Schroders Investment

-0.39

Correlation Coefficient

Ford  Schroders Investment

Very good diversification

The 3 months correlation between Ford and Schroders is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Schroders Investment Trusts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schroders Investment 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 Schroders Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schroders Investment has no effect on the direction of Ford i.e., Ford and Schroders Investment go up and down completely randomly.

Pair Corralation between Ford and Schroders Investment

Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.39 times more return on investment than Schroders Investment. However, Ford is 2.39 times more volatile than Schroders Investment Trusts. It trades about 0.04 of its potential returns per unit of risk. Schroders Investment Trusts is currently generating about -0.05 per unit of risk. If you would invest  957.00  in Ford Motor on December 29, 2024 and sell it today you would earn a total of  33.00  from holding Ford Motor or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Ford Motor  vs.  Schroders Investment Trusts

Ford Motor

Risk-Adjusted Performance

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.

Schroders Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schroders Investment Trusts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Schroders Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and Schroders Investment

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

The idea behind Ford Motor and Schroders Investment Trusts 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.