Correlation Between Ford and Beeks Trading

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

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

Diversification Opportunities for Ford and Beeks Trading

-0.22

Correlation Coefficient

Ford  Beeks Trading

Very good diversification

The 3 months correlation between Ford and Beeks is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Beeks Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beeks Trading 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 Beeks Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beeks Trading has no effect on the direction of Ford i.e., Ford and Beeks Trading go up and down completely randomly.

Pair Corralation between Ford and Beeks Trading

Taking into account the 90-day investment horizon Ford is expected to generate 9.5 times less return on investment than Beeks Trading. But when comparing it to its historical volatility, Ford Motor is 1.5 times less risky than Beeks Trading. It trades about 0.02 of its potential returns per unit of risk. Beeks Trading is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  25,400  in Beeks Trading on September 12, 2024 and sell it today you would earn a total of  4,600  from holding Beeks Trading or generate 18.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Ford Motor  vs.  Beeks Trading

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.

Beeks Trading

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beeks Trading are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Beeks Trading exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Beeks Trading

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

The idea behind Ford Motor and Beeks Trading 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.