Correlation Between Ford and BTC Digital

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

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

Diversification Opportunities for Ford and BTC Digital

0.52

Correlation Coefficient

Ford  BTC Digital

Very weak diversification

The 3 months correlation between Ford and BTC is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BTC Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTC Digital 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 BTC Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTC Digital has no effect on the direction of Ford i.e., Ford and BTC Digital go up and down completely randomly.

Pair Corralation between Ford and BTC Digital

Taking into account the 90-day investment horizon Ford is expected to generate 113.65 times less return on investment than BTC Digital. But when comparing it to its historical volatility, Ford Motor is 20.54 times less risky than BTC Digital. It trades about 0.03 of its potential returns per unit of risk. BTC Digital is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  145.00  in BTC Digital on September 2, 2024 and sell it today you would earn a total of  1,443  from holding BTC Digital or generate 995.17% 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.  BTC Digital

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.

BTC Digital

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BTC Digital are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, BTC Digital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and BTC Digital

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

The idea behind Ford Motor and BTC Digital 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.