Correlation Between Ford and Cinis Fertilizer

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

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

Diversification Opportunities for Ford and Cinis Fertilizer

0.28

Correlation Coefficient

Ford  Cinis Fertilizer

Modest diversification

The 3 months correlation between Ford and Cinis is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cinis Fertilizer AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cinis Fertilizer 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 Cinis Fertilizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cinis Fertilizer has no effect on the direction of Ford i.e., Ford and Cinis Fertilizer go up and down completely randomly.

Pair Corralation between Ford and Cinis Fertilizer

Taking into account the 90-day investment horizon Ford is expected to generate 1.34 times less return on investment than Cinis Fertilizer. But when comparing it to its historical volatility, Ford Motor is 7.1 times less risky than Cinis Fertilizer. It trades about 0.03 of its potential returns per unit of risk. Cinis Fertilizer AB is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  993.00  in Cinis Fertilizer AB on December 27, 2024 and sell it today you would lose (412.00) from holding Cinis Fertilizer AB or give up 41.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Ford Motor  vs.  Cinis Fertilizer AB

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Cinis Fertilizer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cinis Fertilizer AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cinis Fertilizer 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 Cinis Fertilizer

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

The idea behind Ford Motor and Cinis Fertilizer AB 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.