Correlation Between Ford and Nuveen Necticut

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

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

Diversification Opportunities for Ford and Nuveen Necticut

0.27

Correlation Coefficient

Ford  Nuveen Necticut

Modest diversification

The 3 months correlation between Ford and Nuveen is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nuveen Necticut Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Necticut Municipal 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 Nuveen Necticut. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Necticut Municipal has no effect on the direction of Ford i.e., Ford and Nuveen Necticut go up and down completely randomly.

Pair Corralation between Ford and Nuveen Necticut

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Nuveen Necticut. In addition to that, Ford is 10.16 times more volatile than Nuveen Necticut Municipal. It trades about 0.0 of its total potential returns per unit of risk. Nuveen Necticut Municipal is currently generating about 0.04 per unit of volatility. If you would invest  937.00  in Nuveen Necticut Municipal on October 10, 2024 and sell it today you would earn a total of  19.00  from holding Nuveen Necticut Municipal or generate 2.03% return on investment over 90 days.

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

Ford Motor  vs.  Nuveen Necticut Municipal

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 abnormal 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.

Nuveen Necticut Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Necticut Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nuveen Necticut is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Nuveen Necticut

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

The idea behind Ford Motor and Nuveen Necticut Municipal 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.