Correlation Between Ford and Direct Equity

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

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

Diversification Opportunities for Ford and Direct Equity

-0.41

Correlation Coefficient

Ford  Direct Equity

Very good diversification

The 3 months correlation between Ford and Direct is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Direct Equity International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Equity Intern 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 Direct Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Equity Intern has no effect on the direction of Ford i.e., Ford and Direct Equity go up and down completely randomly.

Pair Corralation between Ford and Direct Equity

If you would invest  1,022  in Ford Motor on September 5, 2024 and sell it today you would earn a total of  52.00  from holding Ford Motor or generate 5.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Direct Equity International

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.

Direct Equity Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direct Equity International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Ford and Direct Equity

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

The idea behind Ford Motor and Direct Equity International 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.