Correlation Between Ford and Lineage Cell

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

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

Diversification Opportunities for Ford and Lineage Cell

0.62

Correlation Coefficient

Ford  Lineage Cell

Poor diversification

The 3 months correlation between Ford and Lineage is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Lineage Cell Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lineage Cell Therapeutics 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 Lineage Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lineage Cell Therapeutics has no effect on the direction of Ford i.e., Ford and Lineage Cell go up and down completely randomly.

Pair Corralation between Ford and Lineage Cell

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Lineage Cell. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 4.32 times less risky than Lineage Cell. The stock trades about -0.22 of its potential returns per unit of risk. The Lineage Cell Therapeutics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  21,370  in Lineage Cell Therapeutics on October 9, 2024 and sell it today you would lose (370.00) from holding Lineage Cell Therapeutics or give up 1.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	84.21%
Values	Daily Returns

Ford Motor  vs.  Lineage Cell Therapeutics

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.

Lineage Cell Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lineage Cell Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ford and Lineage Cell

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

The idea behind Ford Motor and Lineage Cell Therapeutics 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.