Correlation Between Ford and Italtile

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

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

Diversification Opportunities for Ford and Italtile

-0.08

Correlation Coefficient

Ford  Italtile

Good diversification

The 3 months correlation between Ford and Italtile is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Italtile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Italtile 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 Italtile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Italtile has no effect on the direction of Ford i.e., Ford and Italtile go up and down completely randomly.

Pair Corralation between Ford and Italtile

Taking into account the 90-day investment horizon Ford is expected to generate 11.81 times less return on investment than Italtile. In addition to that, Ford is 1.15 times more volatile than Italtile. It trades about 0.0 of its total potential returns per unit of risk. Italtile is currently generating about 0.01 per unit of volatility. If you would invest  129,822  in Italtile on October 13, 2024 and sell it today you would earn a total of  4,078  from holding Italtile or generate 3.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Ford Motor  vs.  Italtile

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.

Italtile

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Italtile are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Italtile is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and Italtile

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

The idea behind Ford Motor and Italtile 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.