Correlation Between Ford and Ben Thanh

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

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

Diversification Opportunities for Ford and Ben Thanh

0.37

Correlation Coefficient

Ford  Ben Thanh

Weak diversification

The 3 months correlation between Ford and Ben is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ben Thanh Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ben Thanh Rubber 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 Ben Thanh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ben Thanh Rubber has no effect on the direction of Ford i.e., Ford and Ben Thanh go up and down completely randomly.

Pair Corralation between Ford and Ben Thanh

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Ben Thanh. In addition to that, Ford is 4.06 times more volatile than Ben Thanh Rubber. It trades about -0.16 of its total potential returns per unit of risk. Ben Thanh Rubber is currently generating about 0.08 per unit of volatility. If you would invest  1,385,000  in Ben Thanh Rubber on September 16, 2024 and sell it today you would earn a total of  10,000  from holding Ben Thanh Rubber or generate 0.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Ben Thanh Rubber

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.

Ben Thanh Rubber

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ben Thanh Rubber are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Ben Thanh may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and Ben Thanh

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

The idea behind Ford Motor and Ben Thanh Rubber 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.