Correlation Between Ford and Canadian Life

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

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

Diversification Opportunities for Ford and Canadian Life

0.53

Correlation Coefficient

Ford  Canadian Life

Very weak diversification

The 3 months correlation between Ford and Canadian is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Canadian Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Life Companies 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 Canadian Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Life Companies has no effect on the direction of Ford i.e., Ford and Canadian Life go up and down completely randomly.

Pair Corralation between Ford and Canadian Life

Taking into account the 90-day investment horizon Ford is expected to generate 48.09 times less return on investment than Canadian Life. In addition to that, Ford is 1.24 times more volatile than Canadian Life Companies. It trades about 0.0 of its total potential returns per unit of risk. Canadian Life Companies is currently generating about 0.28 per unit of volatility. If you would invest  538.00  in Canadian Life Companies on September 12, 2024 and sell it today you would earn a total of  170.00  from holding Canadian Life Companies or generate 31.6% return on investment over 90 days.

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

Ford Motor  vs.  Canadian Life Companies

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 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.

Canadian Life Companies

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Life Companies are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Canadian Life displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Canadian Life

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

The idea behind Ford Motor and Canadian Life Companies 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.