Correlation Between Ford and CHINA SHIP

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

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

Diversification Opportunities for Ford and CHINA SHIP

0.0

Correlation Coefficient

Ford  CHINA SHIP

Pay attention - limited upside

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

Pair Corralation between Ford and CHINA SHIP

If you would invest  1,073  in Ford Motor on September 29, 2024 and sell it today you would lose (70.00) from holding Ford Motor or give up 6.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Ford Motor  vs.  CHINA SHIP DEVL

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.

CHINA SHIP DEVL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA SHIP DEVL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, CHINA SHIP is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ford and CHINA SHIP

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

The idea behind Ford Motor and CHINA SHIP DEVL 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.