Correlation Between Ford and Mobile Tornado

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

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

Diversification Opportunities for Ford and Mobile Tornado

0.54

Correlation Coefficient

Ford  Mobile Tornado

Very weak diversification

The 3 months correlation between Ford and Mobile is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mobile Tornado Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mobile Tornado Group 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 Mobile Tornado. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mobile Tornado Group has no effect on the direction of Ford i.e., Ford and Mobile Tornado go up and down completely randomly.

Pair Corralation between Ford and Mobile Tornado

Taking into account the 90-day investment horizon Ford is expected to generate 20.84 times less return on investment than Mobile Tornado. But when comparing it to its historical volatility, Ford Motor is 5.96 times less risky than Mobile Tornado. It trades about 0.01 of its potential returns per unit of risk. Mobile Tornado Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Mobile Tornado Group on September 28, 2024 and sell it today you would earn a total of  40.00  from holding Mobile Tornado Group or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.63%
Values	Daily Returns

Ford Motor  vs.  Mobile Tornado Group

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.

Mobile Tornado Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mobile Tornado Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Mobile Tornado exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Mobile Tornado

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

The idea behind Ford Motor and Mobile Tornado Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.