Correlation Between Ford and Camden Property

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

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

Diversification Opportunities for Ford and Camden Property

0.29

Correlation Coefficient

Ford  Camden Property

Modest diversification

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

Pair Corralation between Ford and Camden Property

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Camden Property. In addition to that, Ford is 1.6 times more volatile than Camden Property Trust. It trades about -0.01 of its total potential returns per unit of risk. Camden Property Trust is currently generating about 0.04 per unit of volatility. If you would invest  10,522  in Camden Property Trust on September 12, 2024 and sell it today you would earn a total of  1,671  from holding Camden Property Trust or generate 15.88% return on investment over 90 days.

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

Ford Motor  vs.  Camden Property Trust

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) 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.

Camden Property Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Camden Property Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Camden Property is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Camden Property

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

The idea behind Ford Motor and Camden Property Trust 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.