Correlation Between Ford and Enel SpA

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

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

Diversification Opportunities for Ford and Enel SpA

-0.21

Correlation Coefficient

Ford  Enel SpA

Very good diversification

The 3 months correlation between Ford and Enel is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Enel SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel SpA 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 Enel SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel SpA has no effect on the direction of Ford i.e., Ford and Enel SpA go up and down completely randomly.

Pair Corralation between Ford and Enel SpA

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Enel SpA. In addition to that, Ford is 1.56 times more volatile than Enel SpA. It trades about -0.5 of its total potential returns per unit of risk. Enel SpA is currently generating about 0.04 per unit of volatility. If you would invest  677.00  in Enel SpA on September 25, 2024 and sell it today you would earn a total of  4.00  from holding Enel SpA or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  Enel SpA

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.

Enel SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enel SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Enel SpA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and Enel SpA

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

The idea behind Ford Motor and Enel SpA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.