Correlation Between Ford and DAIKIN INDUSTRUNSPADR

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

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

Diversification Opportunities for Ford and DAIKIN INDUSTRUNSPADR

0.02

Correlation Coefficient

Ford  DAIKIN INDUSTRUNSPADR

Significant diversification

The 3 months correlation between Ford and DAIKIN is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and DAIKIN INDUSTRUNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIKIN INDUSTRUNSPADR 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 DAIKIN INDUSTRUNSPADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIKIN INDUSTRUNSPADR has no effect on the direction of Ford i.e., Ford and DAIKIN INDUSTRUNSPADR go up and down completely randomly.

Pair Corralation between Ford and DAIKIN INDUSTRUNSPADR

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the DAIKIN INDUSTRUNSPADR. In addition to that, Ford is 1.18 times more volatile than DAIKIN INDUSTRUNSPADR. It trades about -0.35 of its total potential returns per unit of risk. DAIKIN INDUSTRUNSPADR is currently generating about -0.22 per unit of volatility. If you would invest  1,130  in DAIKIN INDUSTRUNSPADR on September 27, 2024 and sell it today you would lose (60.00) from holding DAIKIN INDUSTRUNSPADR or give up 5.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  DAIKIN INDUSTRUNSPADR

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.

DAIKIN INDUSTRUNSPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DAIKIN INDUSTRUNSPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ford and DAIKIN INDUSTRUNSPADR

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

The idea behind Ford Motor and DAIKIN INDUSTRUNSPADR 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.