Correlation Between Ford and Converge Technology

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

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

Diversification Opportunities for Ford and Converge Technology

-0.1

Correlation Coefficient

Ford  Converge Technology

Good diversification

The 3 months correlation between Ford and Converge is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Converge Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Converge Technology 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 Converge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Converge Technology has no effect on the direction of Ford i.e., Ford and Converge Technology go up and down completely randomly.

Pair Corralation between Ford and Converge Technology

Taking into account the 90-day investment horizon Ford is expected to generate 21.91 times less return on investment than Converge Technology. But when comparing it to its historical volatility, Ford Motor is 3.39 times less risky than Converge Technology. It trades about 0.02 of its potential returns per unit of risk. Converge Technology Solutions is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  323.00  in Converge Technology Solutions on December 28, 2024 and sell it today you would earn a total of  223.00  from holding Converge Technology Solutions or generate 69.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Ford Motor  vs.  Converge Technology Solutions

Ford Motor

Risk-Adjusted Performance

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.

Converge Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Converge Technology Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Converge Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Converge Technology

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

The idea behind Ford Motor and Converge Technology Solutions 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.