Correlation Between Ford and Capstone Infrastructure

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

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

Diversification Opportunities for Ford and Capstone Infrastructure

0.41

Correlation Coefficient

Ford  Capstone Infrastructure

Very weak diversification

The 3 months correlation between Ford and Capstone is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Capstone Infrastructure Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Infrastructure 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 Capstone Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Infrastructure has no effect on the direction of Ford i.e., Ford and Capstone Infrastructure go up and down completely randomly.

Pair Corralation between Ford and Capstone Infrastructure

Taking into account the 90-day investment horizon Ford is expected to generate 1.1 times less return on investment than Capstone Infrastructure. In addition to that, Ford is 1.86 times more volatile than Capstone Infrastructure Corp. It trades about 0.04 of its total potential returns per unit of risk. Capstone Infrastructure Corp is currently generating about 0.08 per unit of volatility. If you would invest  1,460  in Capstone Infrastructure Corp on December 29, 2024 and sell it today you would earn a total of  75.00  from holding Capstone Infrastructure Corp or generate 5.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Ford Motor  vs.  Capstone Infrastructure Corp

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Capstone Infrastructure

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capstone Infrastructure Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Capstone Infrastructure 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 Capstone Infrastructure

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

The idea behind Ford Motor and Capstone Infrastructure Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.