Correlation Between Ford and CPG Old

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

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

Diversification Opportunities for Ford and CPG Old

0.29

Correlation Coefficient

Ford  CPG Old

Modest diversification

The 3 months correlation between Ford and CPG is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and CPG Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPG Old 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 CPG Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPG Old has no effect on the direction of Ford i.e., Ford and CPG Old go up and down completely randomly.

Pair Corralation between Ford and CPG Old

Taking into account the 90-day investment horizon Ford is expected to generate 7.05 times less return on investment than CPG Old. In addition to that, Ford is 1.0 times more volatile than CPG Old. It trades about 0.0 of its total potential returns per unit of risk. CPG Old is currently generating about 0.03 per unit of volatility. If you would invest  665.00  in CPG Old on October 11, 2024 and sell it today you would earn a total of  134.00  from holding CPG Old or generate 20.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.56%
Values	Daily Returns

Ford Motor  vs.  CPG Old

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 abnormal 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.

CPG Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CPG Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CPG Old is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and CPG Old

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

The idea behind Ford Motor and CPG Old 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.