Correlation Between Ford and CSN Minerao

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

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

Diversification Opportunities for Ford and CSN Minerao

-0.49

Correlation Coefficient

Ford  CSN Minerao

Very good diversification

The 3 months correlation between Ford and CSN is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and CSN Minerao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSN Minerao SA 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 CSN Minerao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSN Minerao SA has no effect on the direction of Ford i.e., Ford and CSN Minerao go up and down completely randomly.

Pair Corralation between Ford and CSN Minerao

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.62 times more return on investment than CSN Minerao. However, Ford Motor is 1.62 times less risky than CSN Minerao. It trades about 0.03 of its potential returns per unit of risk. CSN Minerao SA is currently generating about 0.02 per unit of risk. If you would invest  1,083  in Ford Motor on September 2, 2024 and sell it today you would earn a total of  30.00  from holding Ford Motor or generate 2.77% return on investment over 90 days.

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

Ford Motor  vs.  CSN Minerao SA

Ford Motor

Risk-Adjusted Performance

2 of 100

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.

CSN Minerao SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CSN Minerao SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CSN Minerao is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and CSN Minerao

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

The idea behind Ford Motor and CSN Minerao SA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.