Correlation Between Ford and Global Tech

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

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

Diversification Opportunities for Ford and Global Tech

-0.46

Correlation Coefficient

Ford  Global Tech

Very good diversification

The 3 months correlation between Ford and Global is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Global Tech Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Tech Industries 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 Global Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Tech Industries has no effect on the direction of Ford i.e., Ford and Global Tech go up and down completely randomly.

Pair Corralation between Ford and Global Tech

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Global Tech. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 28.19 times less risky than Global Tech. The stock trades about -0.09 of its potential returns per unit of risk. The Global Tech Industries is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Global Tech Industries on December 1, 2024 and sell it today you would earn a total of  3.77  from holding Global Tech Industries or generate 251.33% return on investment over 90 days.

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

Ford Motor  vs.  Global Tech Industries

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Global Tech Industries

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Tech Industries are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Global Tech demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Global Tech

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

The idea behind Ford Motor and Global Tech Industries 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.