Correlation Between Ford and Datalex

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

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

Diversification Opportunities for Ford and Datalex

0.01

Correlation Coefficient

Ford  Datalex

Significant diversification

The 3 months correlation between Ford and Datalex is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Datalex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datalex 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 Datalex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datalex has no effect on the direction of Ford i.e., Ford and Datalex go up and down completely randomly.

Pair Corralation between Ford and Datalex

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.78 times more return on investment than Datalex. However, Ford Motor is 1.29 times less risky than Datalex. It trades about -0.06 of its potential returns per unit of risk. Datalex is currently generating about -0.06 per unit of risk. If you would invest  1,253  in Ford Motor on October 7, 2024 and sell it today you would lose (265.00) from holding Ford Motor or give up 21.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Ford Motor  vs.  Datalex

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.

Datalex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datalex has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's technical and fundamental 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 Datalex

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

The idea behind Ford Motor and Datalex 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.