Correlation Between Ford and Chrysalis Investments

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

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

Diversification Opportunities for Ford and Chrysalis Investments

-0.63

Correlation Coefficient

Ford  Chrysalis Investments

Excellent diversification

The 3 months correlation between Ford and Chrysalis is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Chrysalis Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chrysalis Investments 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 Chrysalis Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chrysalis Investments has no effect on the direction of Ford i.e., Ford and Chrysalis Investments go up and down completely randomly.

Pair Corralation between Ford and Chrysalis Investments

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Chrysalis Investments. In addition to that, Ford is 1.12 times more volatile than Chrysalis Investments. It trades about -0.11 of its total potential returns per unit of risk. Chrysalis Investments is currently generating about 0.06 per unit of volatility. If you would invest  9,630  in Chrysalis Investments on November 29, 2024 and sell it today you would earn a total of  490.00  from holding Chrysalis Investments or generate 5.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

Ford Motor  vs.  Chrysalis Investments

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Chrysalis Investments

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chrysalis Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Chrysalis Investments is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Chrysalis Investments

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

The idea behind Ford Motor and Chrysalis Investments 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.