Correlation Between Ford and Small Company

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

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

Diversification Opportunities for Ford and Small Company

-0.29

Correlation Coefficient

Ford  Small Company

Very good diversification

The 3 months correlation between Ford and Small is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Small Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Value 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 Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Value has no effect on the direction of Ford i.e., Ford and Small Company go up and down completely randomly.

Pair Corralation between Ford and Small Company

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.8 times more return on investment than Small Company. However, Ford is 1.8 times more volatile than Small Pany Value. It trades about 0.05 of its potential returns per unit of risk. Small Pany Value is currently generating about -0.11 per unit of risk. If you would invest  975.00  in Ford Motor on December 26, 2024 and sell it today you would earn a total of  54.00  from holding Ford Motor or generate 5.54% return on investment over 90 days.

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

Ford Motor  vs.  Small Pany Value

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Small Pany Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Pany Value 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 Small Company

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

The idea behind Ford Motor and Small Pany Value 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.