Correlation Between Ford and Dreyfus Worldwide

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

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

Diversification Opportunities for Ford and Dreyfus Worldwide

0.63

Correlation Coefficient

Ford  Dreyfus Worldwide

Poor diversification

The 3 months correlation between Ford and Dreyfus is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dreyfus Worldwide Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Worldwide Growth 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 Dreyfus Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Worldwide Growth has no effect on the direction of Ford i.e., Ford and Dreyfus Worldwide go up and down completely randomly.

Pair Corralation between Ford and Dreyfus Worldwide

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Dreyfus Worldwide. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.77 times less risky than Dreyfus Worldwide. The stock trades about -0.34 of its potential returns per unit of risk. The Dreyfus Worldwide Growth is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  7,470  in Dreyfus Worldwide Growth on September 28, 2024 and sell it today you would lose (687.00) from holding Dreyfus Worldwide Growth or give up 9.2% of portfolio value over 90 days.

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

Ford Motor  vs.  Dreyfus Worldwide Growth

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.

Dreyfus Worldwide Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreyfus Worldwide Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Ford and Dreyfus Worldwide

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

The idea behind Ford Motor and Dreyfus Worldwide Growth 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.