Correlation Between Ford and Aberdeen

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

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

Diversification Opportunities for Ford and Aberdeen

-0.29

Correlation Coefficient

Ford  Aberdeen

Very good diversification

The 3 months correlation between Ford and Aberdeen is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aberdeen Eq Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Eq Long 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 Aberdeen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Eq Long has no effect on the direction of Ford i.e., Ford and Aberdeen go up and down completely randomly.

Pair Corralation between Ford and Aberdeen

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Aberdeen. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 9.77 times less risky than Aberdeen. The stock trades about -0.04 of its potential returns per unit of risk. The Aberdeen Eq Long Short is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  828.00  in Aberdeen Eq Long Short on November 29, 2024 and sell it today you would earn a total of  2,126  from holding Aberdeen Eq Long Short or generate 256.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.9%
Values	Daily Returns

Ford Motor  vs.  Aberdeen Eq Long Short

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.

Aberdeen Eq Long

Risk-Adjusted Performance

OK

Over the last 90 days Aberdeen Eq Long Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak forward indicators, Aberdeen showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Aberdeen

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

The idea behind Ford Motor and Aberdeen Eq Long Short 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.