Correlation Between Ford and Eos Energy

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

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

Diversification Opportunities for Ford and Eos Energy

-0.4

Correlation Coefficient

Ford  Eos Energy

Very good diversification

The 3 months correlation between Ford and Eos is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Eos Energy Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eos Energy Enterprises 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 Eos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eos Energy Enterprises has no effect on the direction of Ford i.e., Ford and Eos Energy go up and down completely randomly.

Pair Corralation between Ford and Eos Energy

Taking into account the 90-day investment horizon Ford is expected to generate 11.22 times less return on investment than Eos Energy. But when comparing it to its historical volatility, Ford Motor is 6.27 times less risky than Eos Energy. It trades about 0.03 of its potential returns per unit of risk. Eos Energy Enterprises is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Eos Energy Enterprises on September 3, 2024 and sell it today you would lose (1.00) from holding Eos Energy Enterprises or give up 5.26% of portfolio value over 90 days.

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

Ford Motor  vs.  Eos Energy Enterprises

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Eos Energy Enterprises

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eos Energy Enterprises are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Eos Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Eos Energy

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

The idea behind Ford Motor and Eos Energy Enterprises 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..