Correlation Between Ford and Genus Paper

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

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

Diversification Opportunities for Ford and Genus Paper

-0.18

Correlation Coefficient

Ford  Genus Paper

Good diversification

The 3 months correlation between Ford and Genus is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Genus Paper Boards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genus Paper Boards 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 Genus Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genus Paper Boards has no effect on the direction of Ford i.e., Ford and Genus Paper go up and down completely randomly.

Pair Corralation between Ford and Genus Paper

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.8 times more return on investment than Genus Paper. However, Ford Motor is 1.25 times less risky than Genus Paper. It trades about -0.03 of its potential returns per unit of risk. Genus Paper Boards is currently generating about -0.06 per unit of risk. If you would invest  1,035  in Ford Motor on October 8, 2024 and sell it today you would lose (47.00) from holding Ford Motor or give up 4.54% of portfolio value over 90 days.

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

Ford Motor  vs.  Genus Paper Boards

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 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.

Genus Paper Boards

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genus Paper Boards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ford and Genus Paper

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

The idea behind Ford Motor and Genus Paper Boards 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.