Correlation Between Ford and Crew Energy

Can any of the company-specific risk be diversified away by investing in both Ford and Crew 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 Crew 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 Crew Energy, you can compare the effects of market volatilities on Ford and Crew 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 Crew Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Crew Energy.

Diversification Opportunities for Ford and Crew Energy

-0.14

Correlation Coefficient

Ford  Crew Energy

Good diversification

The 3 months correlation between Ford and Crew is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Crew Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crew Energy 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 Crew Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crew Energy has no effect on the direction of Ford i.e., Ford and Crew Energy go up and down completely randomly.

Pair Corralation between Ford and Crew Energy

Taking into account the 90-day investment horizon Ford is expected to generate 15.15 times less return on investment than Crew Energy. But when comparing it to its historical volatility, Ford Motor is 2.58 times less risky than Crew Energy. It trades about 0.01 of its potential returns per unit of risk. Crew Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  337.00  in Crew Energy on September 3, 2024 and sell it today you would earn a total of  214.00  from holding Crew Energy or generate 63.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.46%
Values	Daily Returns

Ford Motor  vs.  Crew Energy

Ford Motor

Risk-Adjusted Performance

2 of 100

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.

Crew Energy

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Crew Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile technical and fundamental indicators, Crew Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Crew Energy

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

The idea behind Ford Motor and Crew Energy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.