Correlation Between Ford and Avrot Industries

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

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

Diversification Opportunities for Ford and Avrot Industries

0.0

Correlation Coefficient

Ford  Avrot Industries

Pay attention - limited upside

The 3 months correlation between Ford and Avrot is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Avrot Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avrot Industries 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 Avrot Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avrot Industries has no effect on the direction of Ford i.e., Ford and Avrot Industries go up and down completely randomly.

Pair Corralation between Ford and Avrot Industries

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Avrot Industries. In addition to that, Ford is 1.06 times more volatile than Avrot Industries. It trades about -0.1 of its total potential returns per unit of risk. Avrot Industries is currently generating about 0.15 per unit of volatility. If you would invest  4,580  in Avrot Industries on November 29, 2024 and sell it today you would earn a total of  220.00  from holding Avrot Industries or generate 4.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	81.82%
Values	Daily Returns

Ford Motor  vs.  Avrot Industries

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Avrot Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avrot Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Avrot Industries may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Ford and Avrot Industries

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

The idea behind Ford Motor and Avrot Industries 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.