Correlation Between Ford and Catalyst/millburn

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

By analyzing existing cross correlation between Ford Motor and Catalystmillburn Dynamic Commodity, you can compare the effects of market volatilities on Ford and Catalyst/millburn 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 Catalyst/millburn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Catalyst/millburn.

Diversification Opportunities for Ford and Catalyst/millburn

0.67

Correlation Coefficient

Ford  Catalyst/millburn

Poor diversification

The 3 months correlation between Ford and Catalyst/millburn is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Catalystmillburn Dynamic Commo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystmillburn Dyn 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 Catalyst/millburn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystmillburn Dyn has no effect on the direction of Ford i.e., Ford and Catalyst/millburn go up and down completely randomly.

Pair Corralation between Ford and Catalyst/millburn

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.2 times more return on investment than Catalyst/millburn. However, Ford is 1.2 times more volatile than Catalystmillburn Dynamic Commodity. It trades about -0.18 of its potential returns per unit of risk. Catalystmillburn Dynamic Commodity is currently generating about -0.26 per unit of risk. If you would invest  1,044  in Ford Motor on October 6, 2024 and sell it today you would lose (56.00) from holding Ford Motor or give up 5.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  Catalystmillburn Dynamic Commo

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Catalystmillburn Dyn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catalystmillburn Dynamic Commodity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Ford and Catalyst/millburn

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

The idea behind Ford Motor and Catalystmillburn Dynamic Commodity 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.