Correlation Between Ford and Chorus Aviation

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

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

Diversification Opportunities for Ford and Chorus Aviation

0.35

Correlation Coefficient

Ford  Chorus Aviation

Weak diversification

The 3 months correlation between Ford and Chorus is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Chorus Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chorus Aviation 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 Chorus Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chorus Aviation has no effect on the direction of Ford i.e., Ford and Chorus Aviation go up and down completely randomly.

Pair Corralation between Ford and Chorus Aviation

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Chorus Aviation. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.11 times less risky than Chorus Aviation. The stock trades about -0.5 of its potential returns per unit of risk. The Chorus Aviation is currently generating about -0.38 of returns per unit of risk over similar time horizon. If you would invest  334.00  in Chorus Aviation on September 24, 2024 and sell it today you would lose (40.00) from holding Chorus Aviation or give up 11.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  Chorus Aviation

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 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.

Chorus Aviation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chorus Aviation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Chorus Aviation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and Chorus Aviation

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

The idea behind Ford Motor and Chorus Aviation 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.