Correlation Between Ford and Compa Sibiu

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

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

Diversification Opportunities for Ford and Compa Sibiu

-0.05

Correlation Coefficient

Ford  Compa Sibiu

Good diversification

The 3 months correlation between Ford and Compa is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Compa Sibiu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compa Sibiu 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 Compa Sibiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compa Sibiu has no effect on the direction of Ford i.e., Ford and Compa Sibiu go up and down completely randomly.

Pair Corralation between Ford and Compa Sibiu

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.43 times more return on investment than Compa Sibiu. However, Ford is 1.43 times more volatile than Compa Sibiu. It trades about -0.04 of its potential returns per unit of risk. Compa Sibiu is currently generating about -0.11 per unit of risk. If you would invest  976.00  in Ford Motor on December 2, 2024 and sell it today you would lose (21.00) from holding Ford Motor or give up 2.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Compa Sibiu

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.

Compa Sibiu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compa Sibiu has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Compa Sibiu is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Compa Sibiu

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

The idea behind Ford Motor and Compa Sibiu 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.