Correlation Between Ford and Dye Durham

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

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

Diversification Opportunities for Ford and Dye Durham

0.43

Correlation Coefficient

Ford  Dye Durham

Very weak diversification

The 3 months correlation between Ford and Dye is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dye Durham Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dye Durham Limited 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 Dye Durham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dye Durham Limited has no effect on the direction of Ford i.e., Ford and Dye Durham go up and down completely randomly.

Pair Corralation between Ford and Dye Durham

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.44 times more return on investment than Dye Durham. However, Ford Motor is 2.28 times less risky than Dye Durham. It trades about 0.02 of its potential returns per unit of risk. Dye Durham Limited is currently generating about -0.16 per unit of risk. If you would invest  965.00  in Ford Motor on December 17, 2024 and sell it today you would earn a total of  8.00  from holding Ford Motor or generate 0.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Ford Motor  vs.  Dye Durham Limited

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Dye Durham Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ford and Dye Durham

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

The idea behind Ford Motor and Dye Durham Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.