Correlation Between Ford and Cannlabs

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

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

Diversification Opportunities for Ford and Cannlabs

0.15

Correlation Coefficient

Ford  Cannlabs

Average diversification

The 3 months correlation between Ford and Cannlabs is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cannlabs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannlabs 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 Cannlabs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannlabs has no effect on the direction of Ford i.e., Ford and Cannlabs go up and down completely randomly.

Pair Corralation between Ford and Cannlabs

If you would invest  0.01  in Cannlabs on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Cannlabs or generate 0.0% return on investment over 90 days.

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

Ford Motor  vs.  Cannlabs

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 abnormal 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.

Cannlabs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cannlabs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite weak basic indicators, Cannlabs may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and Cannlabs

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

The idea behind Ford Motor and Cannlabs 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.