Correlation Between Ford and Lavoro Limited

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

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

Diversification Opportunities for Ford and Lavoro Limited

-0.48

Correlation Coefficient

Ford  Lavoro Limited

Very good diversification

The 3 months correlation between Ford and Lavoro is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Lavoro Limited Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lavoro Limited Class 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 Lavoro Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lavoro Limited Class has no effect on the direction of Ford i.e., Ford and Lavoro Limited go up and down completely randomly.

Pair Corralation between Ford and Lavoro Limited

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.36 times more return on investment than Lavoro Limited. However, Ford Motor is 2.79 times less risky than Lavoro Limited. It trades about 0.05 of its potential returns per unit of risk. Lavoro Limited Class is currently generating about -0.08 per unit of risk. If you would invest  975.00  in Ford Motor on December 26, 2024 and sell it today you would earn a total of  54.00  from holding Ford Motor or generate 5.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Ford Motor  vs.  Lavoro Limited Class

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.

Lavoro Limited Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lavoro Limited Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ford and Lavoro Limited

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

The idea behind Ford Motor and Lavoro Limited Class 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.