Correlation Between Ford and Ivy Natural

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

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

Diversification Opportunities for Ford and Ivy Natural

0.33

Correlation Coefficient

Ford  Ivy Natural

Weak diversification

The 3 months correlation between Ford and Ivy is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ivy Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Natural Resources 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 Ivy Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Natural Resources has no effect on the direction of Ford i.e., Ford and Ivy Natural go up and down completely randomly.

Pair Corralation between Ford and Ivy Natural

Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.38 times more return on investment than Ivy Natural. However, Ford is 2.38 times more volatile than Ivy Natural Resources. It trades about 0.14 of its potential returns per unit of risk. Ivy Natural Resources is currently generating about 0.18 per unit of risk. If you would invest  1,022  in Ford Motor on September 5, 2024 and sell it today you would earn a total of  60.00  from holding Ford Motor or generate 5.87% return on investment over 90 days.

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

Ford Motor  vs.  Ivy Natural Resources

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Ivy Natural Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ivy Natural Resources are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ivy Natural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and Ivy Natural

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

The idea behind Ford Motor and Ivy Natural Resources 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.