Correlation Between Ford and BRNPB

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

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

Diversification Opportunities for Ford and BRNPB

-0.5

Correlation Coefficient

Ford  BRNPB

Very good diversification

The 3 months correlation between Ford and BRNPB is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BRNPB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRNPB 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 BRNPB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRNPB has no effect on the direction of Ford i.e., Ford and BRNPB go up and down completely randomly.

Pair Corralation between Ford and BRNPB

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.32 times more return on investment than BRNPB. However, Ford Motor is 3.17 times less risky than BRNPB. It trades about 0.13 of its potential returns per unit of risk. BRNPB is currently generating about -0.08 per unit of risk. If you would invest  990.00  in Ford Motor on October 23, 2024 and sell it today you would earn a total of  28.00  from holding Ford Motor or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	27.78%
Values	Daily Returns

Ford Motor  vs.  BRNPB

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.

BRNPB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRNPB has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Ford and BRNPB

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

The idea behind Ford Motor and BRNPB 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.