Correlation Between Ford and IA Clarington

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

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

Diversification Opportunities for Ford and IA Clarington

-0.39

Correlation Coefficient

Ford  IA Clarington

Very good diversification

The 3 months correlation between Ford and ISCB is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and IA Clarington Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA Clarington Strategic 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 IA Clarington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA Clarington Strategic has no effect on the direction of Ford i.e., Ford and IA Clarington go up and down completely randomly.

Pair Corralation between Ford and IA Clarington

Taking into account the 90-day investment horizon Ford is expected to generate 4.77 times less return on investment than IA Clarington. In addition to that, Ford is 6.27 times more volatile than IA Clarington Strategic. It trades about 0.0 of its total potential returns per unit of risk. IA Clarington Strategic is currently generating about 0.14 per unit of volatility. If you would invest  942.00  in IA Clarington Strategic on October 11, 2024 and sell it today you would earn a total of  133.00  from holding IA Clarington Strategic or generate 14.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	53.83%
Values	Daily Returns

Ford Motor  vs.  IA Clarington Strategic

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.

IA Clarington Strategic

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IA Clarington Strategic are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, IA Clarington is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and IA Clarington

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

The idea behind Ford Motor and IA Clarington Strategic 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.