Correlation Between Ford and Crown Energy

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

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

Diversification Opportunities for Ford and Crown Energy

0.34

Correlation Coefficient

Ford  Crown Energy

Weak diversification

The 3 months correlation between Ford and Crown is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Crown Energy AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Energy AB 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 Crown Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Energy AB has no effect on the direction of Ford i.e., Ford and Crown Energy go up and down completely randomly.

Pair Corralation between Ford and Crown Energy

Taking into account the 90-day investment horizon Ford is expected to generate 59.39 times less return on investment than Crown Energy. But when comparing it to its historical volatility, Ford Motor is 11.85 times less risky than Crown Energy. It trades about 0.02 of its potential returns per unit of risk. Crown Energy AB is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3.95  in Crown Energy AB on December 17, 2024 and sell it today you would lose (1.25) from holding Crown Energy AB or give up 31.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Ford Motor  vs.  Crown Energy AB

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.

Crown Energy AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Energy AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Crown Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Crown Energy

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

The idea behind Ford Motor and Crown Energy AB 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.