Correlation Between Ford and Ballard Power

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

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

Diversification Opportunities for Ford and Ballard Power

-0.63

Correlation Coefficient

Ford  Ballard Power

Excellent diversification

The 3 months correlation between Ford and Ballard is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ballard Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ballard Power Systems 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 Ballard Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ballard Power Systems has no effect on the direction of Ford i.e., Ford and Ballard Power go up and down completely randomly.

Pair Corralation between Ford and Ballard Power

Taking into account the 90-day investment horizon Ford is expected to generate 2.23 times less return on investment than Ballard Power. But when comparing it to its historical volatility, Ford Motor is 2.26 times less risky than Ballard Power. It trades about 0.03 of its potential returns per unit of risk. Ballard Power Systems is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  238.00  in Ballard Power Systems on September 11, 2024 and sell it today you would earn a total of  4.00  from holding Ballard Power Systems or generate 1.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Ballard Power Systems

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) 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.

Ballard Power Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ballard Power Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Ballard Power may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and Ballard Power

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

The idea behind Ford Motor and Ballard Power Systems 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.