Correlation Between Ford and Loyalty Ventures

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

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

Diversification Opportunities for Ford and Loyalty Ventures

0.19

Correlation Coefficient

Ford  Loyalty Ventures

Average diversification

The 3 months correlation between Ford and Loyalty is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Loyalty Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loyalty Ventures 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 Loyalty Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loyalty Ventures has no effect on the direction of Ford i.e., Ford and Loyalty Ventures go up and down completely randomly.

Pair Corralation between Ford and Loyalty Ventures

If you would invest  1.17  in Loyalty Ventures on September 30, 2024 and sell it today you would earn a total of  0.00  from holding Loyalty Ventures or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Ford Motor  vs.  Loyalty Ventures

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.

Loyalty Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loyalty Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Loyalty Ventures is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Loyalty Ventures

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

The idea behind Ford Motor and Loyalty Ventures 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.