Correlation Between Ford and Medical Packaging

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

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

Diversification Opportunities for Ford and Medical Packaging

-0.43

Correlation Coefficient

Ford  Medical Packaging

Very good diversification

The 3 months correlation between Ford and Medical is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Medical Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Packaging 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 Medical Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Packaging has no effect on the direction of Ford i.e., Ford and Medical Packaging go up and down completely randomly.

Pair Corralation between Ford and Medical Packaging

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Medical Packaging. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.15 times less risky than Medical Packaging. The stock trades about -0.11 of its potential returns per unit of risk. The Medical Packaging is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  125.00  in Medical Packaging on December 4, 2024 and sell it today you would lose (7.00) from holding Medical Packaging or give up 5.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.33%
Values	Daily Returns

Ford Motor  vs.  Medical Packaging

Ford Motor

Risk-Adjusted Performance

Very Weak

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

Medical Packaging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medical Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Medical Packaging is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and Medical Packaging

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

The idea behind Ford Motor and Medical Packaging 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.