Correlation Between Ford and Multipolar Technology

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

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

Diversification Opportunities for Ford and Multipolar Technology

0.05

Correlation Coefficient

Ford  Multipolar Technology

Significant diversification

The 3 months correlation between Ford and Multipolar is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Multipolar Technology Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multipolar Technology Tbk 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 Multipolar Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multipolar Technology Tbk has no effect on the direction of Ford i.e., Ford and Multipolar Technology go up and down completely randomly.

Pair Corralation between Ford and Multipolar Technology

Taking into account the 90-day investment horizon Ford is expected to generate 19.56 times less return on investment than Multipolar Technology. But when comparing it to its historical volatility, Ford Motor is 3.0 times less risky than Multipolar Technology. It trades about 0.04 of its potential returns per unit of risk. Multipolar Technology Tbk is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,850,000  in Multipolar Technology Tbk on December 29, 2024 and sell it today you would earn a total of  2,220,000  from holding Multipolar Technology Tbk or generate 120.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Ford Motor  vs.  Multipolar Technology Tbk

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Multipolar Technology Tbk

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multipolar Technology Tbk are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Multipolar Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Multipolar Technology

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

The idea behind Ford Motor and Multipolar Technology Tbk 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.