Correlation Between Ford and Deezer SA

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

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

Diversification Opportunities for Ford and Deezer SA

0.14

Correlation Coefficient

Ford  Deezer SA

Average diversification

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

Pair Corralation between Ford and Deezer SA

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.67 times more return on investment than Deezer SA. However, Ford Motor is 1.5 times less risky than Deezer SA. It trades about 0.01 of its potential returns per unit of risk. Deezer SA is currently generating about -0.03 per unit of risk. If you would invest  1,073  in Ford Motor on September 28, 2024 and sell it today you would lose (71.00) from holding Ford Motor or give up 6.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

Ford Motor  vs.  Deezer SA

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.

Deezer SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deezer SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Ford and Deezer SA

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

The idea behind Ford Motor and Deezer SA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.