Correlation Between Ford and Believe SAS

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

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

Diversification Opportunities for Ford and Believe SAS

-0.36

Correlation Coefficient

Ford  Believe SAS

Very good diversification

The 3 months correlation between Ford and Believe is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Believe SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Believe SAS 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 Believe SAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Believe SAS has no effect on the direction of Ford i.e., Ford and Believe SAS go up and down completely randomly.

Pair Corralation between Ford and Believe SAS

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.39 times more return on investment than Believe SAS. However, Ford is 1.39 times more volatile than Believe SAS. It trades about -0.01 of its potential returns per unit of risk. Believe SAS is currently generating about -0.04 per unit of risk. If you would invest  1,066  in Ford Motor on September 16, 2024 and sell it today you would lose (27.00) from holding Ford Motor or give up 2.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Ford Motor  vs.  Believe SAS

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.

Believe SAS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ford and Believe SAS

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

The idea behind Ford Motor and Believe SAS 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.