Correlation Between Ford and Credit Suisse

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

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

Diversification Opportunities for Ford and Credit Suisse

-0.67

Correlation Coefficient

Ford  Credit Suisse

Excellent diversification

The 3 months correlation between Ford and Credit is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Credit Suisse Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Suisse Floating 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 Credit Suisse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Suisse Floating has no effect on the direction of Ford i.e., Ford and Credit Suisse go up and down completely randomly.

Pair Corralation between Ford and Credit Suisse

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Credit Suisse. In addition to that, Ford is 27.96 times more volatile than Credit Suisse Floating. It trades about -0.04 of its total potential returns per unit of risk. Credit Suisse Floating is currently generating about -0.3 per unit of volatility. If you would invest  638.00  in Credit Suisse Floating on December 2, 2024 and sell it today you would lose (3.00) from holding Credit Suisse Floating or give up 0.47% of portfolio value over 90 days.

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

Ford Motor  vs.  Credit Suisse Floating

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.

Credit Suisse Floating

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Suisse Floating are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Credit Suisse 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 Credit Suisse

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

The idea behind Ford Motor and Credit Suisse Floating 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.