Correlation Between Ford and Gen III

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

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

Diversification Opportunities for Ford and Gen III

0.0

Correlation Coefficient

Ford  Gen III

Pay attention - limited upside

The 3 months correlation between Ford and Gen is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Gen III Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gen III Oil 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 Gen III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gen III Oil has no effect on the direction of Ford i.e., Ford and Gen III go up and down completely randomly.

Pair Corralation between Ford and Gen III

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Gen III. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 4.21 times less risky than Gen III. The stock trades about -0.16 of its potential returns per unit of risk. The Gen III Oil is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Gen III Oil on September 16, 2024 and sell it today you would earn a total of  16.00  from holding Gen III Oil or generate 88.89% return on investment over 90 days.

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

Ford Motor  vs.  Gen III Oil

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.

Gen III Oil

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gen III Oil are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal forward indicators, Gen III showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Gen III

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

The idea behind Ford Motor and Gen III Oil 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.