Correlation Between Ford and Investment

Can any of the company-specific risk be diversified away by investing in both Ford and 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 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 Investment and Industrial, you can compare the effects of market volatilities on Ford and 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 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Investment.

Diversification Opportunities for Ford and Investment

-0.34

Correlation Coefficient

Ford  Investment

Very good diversification

The 3 months correlation between Ford and Investment is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Investment and Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment and Industrial 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment and Industrial has no effect on the direction of Ford i.e., Ford and Investment go up and down completely randomly.

Pair Corralation between Ford and Investment

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Investment. In addition to that, Ford is 1.23 times more volatile than Investment and Industrial. It trades about -0.01 of its total potential returns per unit of risk. Investment and Industrial is currently generating about -0.01 per unit of volatility. If you would invest  7,801,445  in Investment and Industrial on September 12, 2024 and sell it today you would lose (1,001,445) from holding Investment and Industrial or give up 12.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.43%
Values	Daily Returns

Ford Motor  vs.  Investment and Industrial

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) 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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Investment and Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investment and Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Investment

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

The idea behind Ford Motor and Investment and Industrial 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.