Correlation Between Ford and Maj Invest

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

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

Diversification Opportunities for Ford and Maj Invest

0.51

Correlation Coefficient

Ford  Maj Invest

Very weak diversification

The 3 months correlation between Ford and Maj is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Maj Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maj Invest 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 Maj Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maj Invest has no effect on the direction of Ford i.e., Ford and Maj Invest go up and down completely randomly.

Pair Corralation between Ford and Maj Invest

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Maj Invest. In addition to that, Ford is 5.72 times more volatile than Maj Invest . It trades about -0.08 of its total potential returns per unit of risk. Maj Invest is currently generating about -0.09 per unit of volatility. If you would invest  10,126  in Maj Invest on December 3, 2024 and sell it today you would lose (178.00) from holding Maj Invest or give up 1.76% of portfolio value over 90 days.

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

Ford Motor  vs.  Maj Invest

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Maj Invest

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maj Invest has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong forward-looking indicators, Maj Invest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Maj Invest

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

The idea behind Ford Motor and Maj Invest 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.