Correlation Between Ford and LPL Financial

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

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

Diversification Opportunities for Ford and LPL Financial

-0.38

Correlation Coefficient

Ford  LPL Financial

Very good diversification

The 3 months correlation between Ford and LPL is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and LPL Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPL Financial Holdings 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 LPL Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPL Financial Holdings has no effect on the direction of Ford i.e., Ford and LPL Financial go up and down completely randomly.

Pair Corralation between Ford and LPL Financial

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.96 times more return on investment than LPL Financial. However, Ford Motor is 1.04 times less risky than LPL Financial. It trades about 0.06 of its potential returns per unit of risk. LPL Financial Holdings is currently generating about -0.04 per unit of risk. If you would invest  943.00  in Ford Motor on December 19, 2024 and sell it today you would earn a total of  52.00  from holding Ford Motor or generate 5.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Ford Motor  vs.  LPL Financial Holdings

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

LPL Financial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days LPL Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LPL Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and LPL Financial

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

The idea behind Ford Motor and LPL Financial Holdings 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.