Correlation Between Ford and Brookfield Renewable

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

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

Diversification Opportunities for Ford and Brookfield Renewable

0.07

Correlation Coefficient

Ford  Brookfield Renewable

Significant diversification

The 3 months correlation between Ford and Brookfield is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Brookfield Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable 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 Brookfield Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Renewable has no effect on the direction of Ford i.e., Ford and Brookfield Renewable go up and down completely randomly.

Pair Corralation between Ford and Brookfield Renewable

Taking into account the 90-day investment horizon Ford Motor is expected to generate 5.34 times more return on investment than Brookfield Renewable. However, Ford is 5.34 times more volatile than Brookfield Renewable Energy. It trades about 0.02 of its potential returns per unit of risk. Brookfield Renewable Energy is currently generating about -0.02 per unit of risk. If you would invest  957.00  in Ford Motor on December 30, 2024 and sell it today you would earn a total of  15.00  from holding Ford Motor or generate 1.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Ford Motor  vs.  Brookfield Renewable Energy

Ford Motor

Risk-Adjusted Performance

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.

Brookfield Renewable

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Brookfield Renewable is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Brookfield Renewable

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

The idea behind Ford Motor and Brookfield Renewable Energy 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.