Correlation Between Ford and Copart

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

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

Diversification Opportunities for Ford and Copart

0.08

Correlation Coefficient

Ford  Copart

Significant diversification

The 3 months correlation between Ford and Copart is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Copart Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copart Inc 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 Copart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copart Inc has no effect on the direction of Ford i.e., Ford and Copart go up and down completely randomly.

Pair Corralation between Ford and Copart

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Copart. In addition to that, Ford is 1.16 times more volatile than Copart Inc. It trades about -0.39 of its total potential returns per unit of risk. Copart Inc is currently generating about -0.18 per unit of volatility. If you would invest  5,912  in Copart Inc on September 23, 2024 and sell it today you would lose (307.00) from holding Copart Inc or give up 5.19% of portfolio value over 90 days.

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

Ford Motor  vs.  Copart Inc

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.

Copart Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Copart Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Copart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Copart

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

The idea behind Ford Motor and Copart Inc 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.