Correlation Between Ford and Columbia Disciplined

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

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

Diversification Opportunities for Ford and Columbia Disciplined

0.76

Correlation Coefficient

Ford  Columbia Disciplined

Poor diversification

The 3 months correlation between Ford and Columbia is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Columbia Disciplined Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Disciplined 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 Columbia Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Disciplined has no effect on the direction of Ford i.e., Ford and Columbia Disciplined go up and down completely randomly.

Pair Corralation between Ford and Columbia Disciplined

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Columbia Disciplined. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.18 times less risky than Columbia Disciplined. The stock trades about -0.22 of its potential returns per unit of risk. The Columbia Disciplined Growth is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,262  in Columbia Disciplined Growth on October 10, 2024 and sell it today you would lose (109.00) from holding Columbia Disciplined Growth or give up 8.64% of portfolio value over 90 days.

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

Ford Motor  vs.  Columbia Disciplined Growth

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.

Columbia Disciplined

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Disciplined Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia Disciplined is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Columbia Disciplined

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

The idea behind Ford Motor and Columbia Disciplined Growth 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.