Correlation Between Ford and Backrock Glbl

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

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

Diversification Opportunities for Ford and Backrock Glbl

0.5

Correlation Coefficient

Ford  Backrock Glbl

Very weak diversification

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

Pair Corralation between Ford and Backrock Glbl

Taking into account the 90-day investment horizon Ford is expected to generate 1.24 times less return on investment than Backrock Glbl. In addition to that, Ford is 1.69 times more volatile than Backrock Glbl Opprtnts. It trades about 0.13 of its total potential returns per unit of risk. Backrock Glbl Opprtnts is currently generating about 0.27 per unit of volatility. If you would invest  1,783  in Backrock Glbl Opprtnts on October 24, 2024 and sell it today you would earn a total of  65.00  from holding Backrock Glbl Opprtnts or generate 3.65% return on investment over 90 days.

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

Ford Motor  vs.  Backrock Glbl Opprtnts

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Backrock Glbl Opprtnts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Backrock Glbl Opprtnts has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Backrock Glbl 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 Backrock Glbl

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

The idea behind Ford Motor and Backrock Glbl Opprtnts 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..