Correlation Between Ford and Mister Car

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

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

Diversification Opportunities for Ford and Mister Car

0.25

Correlation Coefficient

Ford  Mister Car

Modest diversification

The 3 months correlation between Ford and Mister is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mister Car Wash, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mister Car Wash, 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 Mister Car. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mister Car Wash, has no effect on the direction of Ford i.e., Ford and Mister Car go up and down completely randomly.

Pair Corralation between Ford and Mister Car

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.8 times more return on investment than Mister Car. However, Ford Motor is 1.25 times less risky than Mister Car. It trades about 0.01 of its potential returns per unit of risk. Mister Car Wash, is currently generating about -0.01 per unit of risk. If you would invest  1,030  in Ford Motor on October 10, 2024 and sell it today you would lose (54.00) from holding Ford Motor or give up 5.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Mister Car Wash,

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 abnormal 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.

Mister Car Wash,

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mister Car Wash, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Mister Car may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and Mister Car

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

The idea behind Ford Motor and Mister Car Wash, 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.