Correlation Between Ford and Evolve Automobile

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

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

Diversification Opportunities for Ford and Evolve Automobile

-0.02

Correlation Coefficient

Ford  Evolve Automobile

Good diversification

The 3 months correlation between Ford and Evolve is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Evolve Automobile Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Automobile 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 Evolve Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Automobile has no effect on the direction of Ford i.e., Ford and Evolve Automobile go up and down completely randomly.

Pair Corralation between Ford and Evolve Automobile

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Evolve Automobile. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.04 times less risky than Evolve Automobile. The stock trades about -0.09 of its potential returns per unit of risk. The Evolve Automobile Innovation is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,068  in Evolve Automobile Innovation on December 2, 2024 and sell it today you would lose (83.00) from holding Evolve Automobile Innovation or give up 4.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Ford Motor  vs.  Evolve Automobile Innovation

Ford Motor

Risk-Adjusted Performance

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.

Evolve Automobile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolve Automobile Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Evolve Automobile is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Evolve Automobile

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

The idea behind Ford Motor and Evolve Automobile Innovation 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.