Correlation Between Ford and Development Investment

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

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

Diversification Opportunities for Ford and Development Investment

0.37

Correlation Coefficient

Ford  Development Investment

Weak diversification

The 3 months correlation between Ford and Development is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Development Investment Constru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Development Investment 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 Development Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Development Investment has no effect on the direction of Ford i.e., Ford and Development Investment go up and down completely randomly.

Pair Corralation between Ford and Development Investment

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Development Investment. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.04 times less risky than Development Investment. The stock trades about -0.09 of its potential returns per unit of risk. The Development Investment Construction is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,540,000  in Development Investment Construction on December 4, 2024 and sell it today you would earn a total of  10,000  from holding Development Investment Construction or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	83.05%
Values	Daily Returns

Ford Motor  vs.  Development Investment Constru

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Development Investment

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Development Investment Construction are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Development Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Development Investment

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

The idea behind Ford Motor and Development Investment 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.