Correlation Between Ford and Compagnie

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

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

Diversification Opportunities for Ford and Compagnie

0.43

Correlation Coefficient

Ford  Compagnie

Very weak diversification

The 3 months correlation between Ford and Compagnie is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint 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 Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Ford i.e., Ford and Compagnie go up and down completely randomly.

Pair Corralation between Ford and Compagnie

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Compagnie. In addition to that, Ford is 1.16 times more volatile than Compagnie de Saint Gobain. It trades about -0.15 of its total potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about -0.07 per unit of volatility. If you would invest  1,852  in Compagnie de Saint Gobain on October 9, 2024 and sell it today you would lose (73.00) from holding Compagnie de Saint Gobain or give up 3.94% of portfolio value over 90 days.

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

Ford Motor  vs.  Compagnie de Saint Gobain

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 nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Compagnie de Saint

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie de Saint Gobain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Compagnie is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Compagnie

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

The idea behind Ford Motor and Compagnie de Saint Gobain 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.