Correlation Between Ford and Long Giang

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

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

Diversification Opportunities for Ford and Long Giang

-0.21

Correlation Coefficient

Ford  Long Giang

Very good diversification

The 3 months correlation between Ford and Long is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Long Giang Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Giang Investment 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 Long Giang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Giang Investment has no effect on the direction of Ford i.e., Ford and Long Giang go up and down completely randomly.

Pair Corralation between Ford and Long Giang

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Long Giang. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.21 times less risky than Long Giang. The stock trades about -0.35 of its potential returns per unit of risk. The Long Giang Investment is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  242,000  in Long Giang Investment on October 2, 2024 and sell it today you would earn a total of  13,000  from holding Long Giang Investment or generate 5.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Long Giang Investment

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.

Long Giang Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Long Giang Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Long Giang is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Long Giang

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

The idea behind Ford Motor and Long Giang Investment 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.