Correlation Between Ford and Elior SCA

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

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

Diversification Opportunities for Ford and Elior SCA

-0.1

Correlation Coefficient

Ford  Elior SCA

Good diversification

The 3 months correlation between Ford and Elior is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Elior SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elior SCA 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 Elior SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elior SCA has no effect on the direction of Ford i.e., Ford and Elior SCA go up and down completely randomly.

Pair Corralation between Ford and Elior SCA

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.49 times more return on investment than Elior SCA. However, Ford Motor is 2.04 times less risky than Elior SCA. It trades about -0.01 of its potential returns per unit of risk. Elior SCA is currently generating about -0.09 per unit of risk. If you would invest  1,066  in Ford Motor on September 15, 2024 and sell it today you would lose (27.00) from holding Ford Motor or give up 2.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  Elior SCA

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.

Elior SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elior SCA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Ford and Elior SCA

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

The idea behind Ford Motor and Elior SCA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.