Correlation Between Ford and Futuris

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

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

Diversification Opportunities for Ford and Futuris

-0.16

Correlation Coefficient

Ford  Futuris

Good diversification

The 3 months correlation between Ford and Futuris is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Futuris Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Futuris Company 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 Futuris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Futuris Company has no effect on the direction of Ford i.e., Ford and Futuris go up and down completely randomly.

Pair Corralation between Ford and Futuris

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.41 times more return on investment than Futuris. However, Ford Motor is 2.42 times less risky than Futuris. It trades about -0.06 of its potential returns per unit of risk. Futuris Company is currently generating about -0.24 per unit of risk. If you would invest  976.00  in Ford Motor on November 29, 2024 and sell it today you would lose (29.00) from holding Ford Motor or give up 2.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Futuris Company

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Futuris Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Futuris Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Futuris is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Futuris

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

The idea behind Ford Motor and Futuris Company 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.