Correlation Between Ford and Brait SE

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

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

Diversification Opportunities for Ford and Brait SE

-0.4

Correlation Coefficient

Ford  Brait SE

Very good diversification

The 3 months correlation between Ford and Brait is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Brait SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brait SE 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 Brait SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brait SE has no effect on the direction of Ford i.e., Ford and Brait SE go up and down completely randomly.

Pair Corralation between Ford and Brait SE

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Brait SE. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.26 times less risky than Brait SE. The stock trades about -0.27 of its potential returns per unit of risk. The Brait SE is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  20,400  in Brait SE on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Brait SE or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Ford Motor  vs.  Brait SE

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 abnormal 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.

Brait SE

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brait SE are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Brait SE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Brait SE

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

The idea behind Ford Motor and Brait SE 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.