Correlation Between Ford and Baillie Gifford

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

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

Diversification Opportunities for Ford and Baillie Gifford

0.25

Correlation Coefficient

Ford  Baillie Gifford

Modest diversification

The 3 months correlation between Ford and Baillie is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Baillie Gifford China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford China 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 Baillie Gifford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baillie Gifford China has no effect on the direction of Ford i.e., Ford and Baillie Gifford go up and down completely randomly.

Pair Corralation between Ford and Baillie Gifford

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.52 times more return on investment than Baillie Gifford. However, Ford is 1.52 times more volatile than Baillie Gifford China. It trades about 0.02 of its potential returns per unit of risk. Baillie Gifford China is currently generating about -0.03 per unit of risk. If you would invest  961.00  in Ford Motor on September 13, 2024 and sell it today you would earn a total of  80.00  from holding Ford Motor or generate 8.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Ford Motor  vs.  Baillie Gifford China

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 nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Baillie Gifford China

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baillie Gifford China are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Baillie Gifford showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Baillie Gifford

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

The idea behind Ford Motor and Baillie Gifford China 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..