Correlation Between Ford and Romcab SA

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

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

Diversification Opportunities for Ford and Romcab SA

0.1

Correlation Coefficient

Ford  Romcab SA

Average diversification

The 3 months correlation between Ford and Romcab is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Romcab SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Romcab SA 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 Romcab SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Romcab SA has no effect on the direction of Ford i.e., Ford and Romcab SA go up and down completely randomly.

Pair Corralation between Ford and Romcab SA

Taking into account the 90-day investment horizon Ford is expected to generate 15.4 times less return on investment than Romcab SA. But when comparing it to its historical volatility, Ford Motor is 5.51 times less risky than Romcab SA. It trades about 0.06 of its potential returns per unit of risk. Romcab SA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Romcab SA on December 19, 2024 and sell it today you would earn a total of  1.68  from holding Romcab SA or generate 84.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.22%
Values	Daily Returns

Ford Motor  vs.  Romcab SA

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Romcab SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Romcab SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Romcab SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Romcab SA

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

The idea behind Ford Motor and Romcab SA 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.