Correlation Between Ford and DIC Holdings

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

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

Diversification Opportunities for Ford and DIC Holdings

0.34

Correlation Coefficient

Ford  DIC Holdings

Weak diversification

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

Pair Corralation between Ford and DIC Holdings

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.51 times more return on investment than DIC Holdings. However, Ford Motor is 1.95 times less risky than DIC Holdings. It trades about -0.01 of its potential returns per unit of risk. DIC Holdings Construction is currently generating about -0.02 per unit of risk. If you would invest  1,277  in Ford Motor on September 12, 2024 and sell it today you would lose (221.00) from holding Ford Motor or give up 17.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.43%
Values	Daily Returns

Ford Motor  vs.  DIC Holdings Construction

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.

DIC Holdings Construction

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DIC Holdings Construction are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIC Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and DIC Holdings

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

The idea behind Ford Motor and DIC Holdings Construction 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.