Correlation Between Ford and Ipsen SA

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

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

Diversification Opportunities for Ford and Ipsen SA

-0.43

Correlation Coefficient

Ford  Ipsen SA

Very good diversification

The 3 months correlation between Ford and Ipsen is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ipsen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ipsen SA 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 Ipsen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ipsen SA has no effect on the direction of Ford i.e., Ford and Ipsen SA go up and down completely randomly.

Pair Corralation between Ford and Ipsen SA

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Ipsen SA. In addition to that, Ford is 1.41 times more volatile than Ipsen SA. It trades about -0.01 of its total potential returns per unit of risk. Ipsen SA is currently generating about 0.04 per unit of volatility. If you would invest  9,534  in Ipsen SA on October 24, 2024 and sell it today you would earn a total of  2,456  from holding Ipsen SA or generate 25.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.6%
Values	Daily Returns

Ford Motor  vs.  Ipsen SA

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 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.

Ipsen SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ipsen SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Ipsen SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and Ipsen SA

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

The idea behind Ford Motor and Ipsen SA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.