Correlation Between Ford and Fosun International

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

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

Diversification Opportunities for Ford and Fosun International

0.12

Correlation Coefficient

Ford  Fosun International

Average diversification

The 3 months correlation between Ford and Fosun is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fosun International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fosun International 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 Fosun International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fosun International has no effect on the direction of Ford i.e., Ford and Fosun International go up and down completely randomly.

Pair Corralation between Ford and Fosun International

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.89 times more return on investment than Fosun International. However, Ford Motor is 1.12 times less risky than Fosun International. It trades about 0.23 of its potential returns per unit of risk. Fosun International is currently generating about -0.18 per unit of risk. If you would invest  1,015  in Ford Motor on September 1, 2024 and sell it today you would earn a total of  98.00  from holding Ford Motor or generate 9.66% return on investment over 90 days.

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

Ford Motor  vs.  Fosun International

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Fosun International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fosun International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Fosun International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Fosun International

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

The idea behind Ford Motor and Fosun International 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.