Correlation Between Ford and Magic Eden

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

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

Diversification Opportunities for Ford and Magic Eden

-0.83

Correlation Coefficient

Ford  Magic Eden

Pay attention - limited upside

The 3 months correlation between Ford and Magic is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Magic Eden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magic Eden 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 Magic Eden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magic Eden has no effect on the direction of Ford i.e., Ford and Magic Eden go up and down completely randomly.

Pair Corralation between Ford and Magic Eden

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.15 times more return on investment than Magic Eden. However, Ford Motor is 6.57 times less risky than Magic Eden. It trades about 0.13 of its potential returns per unit of risk. Magic Eden is currently generating about -0.25 per unit of risk. If you would invest  990.00  in Ford Motor on October 23, 2024 and sell it today you would earn a total of  28.00  from holding Ford Motor or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	90.0%
Values	Daily Returns

Ford Motor  vs.  Magic Eden

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.

Magic Eden

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Eden are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Magic Eden exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Magic Eden

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

The idea behind Ford Motor and Magic Eden 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.