Correlation Between Ford and Dah Sing

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

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

Diversification Opportunities for Ford and Dah Sing

0.03

Correlation Coefficient

Ford  Dah Sing

Significant diversification

The 3 months correlation between Ford and Dah is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dah Sing Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dah Sing Financial 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 Dah Sing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dah Sing Financial has no effect on the direction of Ford i.e., Ford and Dah Sing go up and down completely randomly.

Pair Corralation between Ford and Dah Sing

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Dah Sing. In addition to that, Ford is 1.21 times more volatile than Dah Sing Financial. It trades about -0.01 of its total potential returns per unit of risk. Dah Sing Financial is currently generating about 0.15 per unit of volatility. If you would invest  878.00  in Dah Sing Financial on September 16, 2024 and sell it today you would earn a total of  143.00  from holding Dah Sing Financial or generate 16.29% return on investment over 90 days.

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

Ford Motor  vs.  Dah Sing Financial

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.

Dah Sing Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dah Sing Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dah Sing showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Dah Sing

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

The idea behind Ford Motor and Dah Sing Financial 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.