Correlation Between Ford and Cambiar Smid

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

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

Diversification Opportunities for Ford and Cambiar Smid

0.87

Correlation Coefficient

Ford  Cambiar Smid

Very poor diversification

The 3 months correlation between Ford and Cambiar is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cambiar Smid Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambiar Smid 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 Cambiar Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambiar Smid has no effect on the direction of Ford i.e., Ford and Cambiar Smid go up and down completely randomly.

Pair Corralation between Ford and Cambiar Smid

Taking into account the 90-day investment horizon Ford is expected to generate 3.47 times less return on investment than Cambiar Smid. In addition to that, Ford is 2.55 times more volatile than Cambiar Smid Fund. It trades about 0.0 of its total potential returns per unit of risk. Cambiar Smid Fund is currently generating about 0.01 per unit of volatility. If you would invest  2,264  in Cambiar Smid Fund on October 22, 2024 and sell it today you would earn a total of  24.00  from holding Cambiar Smid Fund or generate 1.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Ford Motor  vs.  Cambiar Smid Fund

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.

Cambiar Smid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambiar Smid Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Ford and Cambiar Smid

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

The idea behind Ford Motor and Cambiar Smid Fund 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.