Correlation Between Ford and Entia Biosciences

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

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

Diversification Opportunities for Ford and Entia Biosciences

0.22

Correlation Coefficient

Ford  Entia Biosciences

Modest diversification

The 3 months correlation between Ford and Entia is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Entia Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entia Biosciences 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 Entia Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entia Biosciences has no effect on the direction of Ford i.e., Ford and Entia Biosciences go up and down completely randomly.

Pair Corralation between Ford and Entia Biosciences

Taking into account the 90-day investment horizon Ford is expected to generate 5.88 times less return on investment than Entia Biosciences. But when comparing it to its historical volatility, Ford Motor is 2.79 times less risky than Entia Biosciences. It trades about 0.0 of its potential returns per unit of risk. Entia Biosciences is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Entia Biosciences on October 26, 2024 and sell it today you would lose (0.01) from holding Entia Biosciences or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Ford Motor  vs.  Entia Biosciences

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Entia Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entia Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ford and Entia Biosciences

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

The idea behind Ford Motor and Entia Biosciences 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.