Correlation Between Ford and Mitsubishi

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

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

Diversification Opportunities for Ford and Mitsubishi

-0.02

Correlation Coefficient

Ford  Mitsubishi

Good diversification

The 3 months correlation between Ford and Mitsubishi is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mitsubishi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi 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 Mitsubishi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi has no effect on the direction of Ford i.e., Ford and Mitsubishi go up and down completely randomly.

Pair Corralation between Ford and Mitsubishi

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Mitsubishi. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.09 times less risky than Mitsubishi. The stock trades about -0.39 of its potential returns per unit of risk. The Mitsubishi is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  1,612  in Mitsubishi on September 23, 2024 and sell it today you would lose (107.00) from holding Mitsubishi or give up 6.64% of portfolio value over 90 days.

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

Ford Motor  vs.  Mitsubishi

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 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.

Mitsubishi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ford and Mitsubishi

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

The idea behind Ford Motor and Mitsubishi 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.