Correlation Between Ford and M3 Brigade

Can any of the company-specific risk be diversified away by investing in both Ford and M3 Brigade 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 M3 Brigade into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and M3 Brigade Acquisition V, you can compare the effects of market volatilities on Ford and M3 Brigade 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 M3 Brigade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and M3 Brigade.

Diversification Opportunities for Ford and M3 Brigade

-0.38

Correlation Coefficient

Ford  M3 Brigade

Very good diversification

The 3 months correlation between Ford and MBAVW is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and M3 Brigade Acquisition V in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Brigade Acquisition 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 M3 Brigade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Brigade Acquisition has no effect on the direction of Ford i.e., Ford and M3 Brigade go up and down completely randomly.

Pair Corralation between Ford and M3 Brigade

Taking into account the 90-day investment horizon Ford is expected to generate 8.07 times less return on investment than M3 Brigade. But when comparing it to its historical volatility, Ford Motor is 2.87 times less risky than M3 Brigade. It trades about 0.08 of its potential returns per unit of risk. M3 Brigade Acquisition V is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  19.00  in M3 Brigade Acquisition V on December 11, 2024 and sell it today you would earn a total of  9.00  from holding M3 Brigade Acquisition V or generate 47.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

Ford Motor  vs.  M3 Brigade Acquisition V

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 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.

M3 Brigade Acquisition

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Brigade Acquisition V are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, M3 Brigade showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and M3 Brigade

The main advantage of trading using opposite Ford and M3 Brigade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, M3 Brigade 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 M3 Brigade will offset losses from the drop in M3 Brigade's long position.

The idea behind Ford Motor and M3 Brigade Acquisition V 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.