Correlation Between Ford and Mentor Capital

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

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

Diversification Opportunities for Ford and Mentor Capital

-0.07

Correlation Coefficient

Ford  Mentor Capital

Good diversification

The 3 months correlation between Ford and Mentor is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mentor Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mentor Capital 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 Mentor Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mentor Capital has no effect on the direction of Ford i.e., Ford and Mentor Capital go up and down completely randomly.

Pair Corralation between Ford and Mentor Capital

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.24 times more return on investment than Mentor Capital. However, Ford Motor is 4.22 times less risky than Mentor Capital. It trades about 0.05 of its potential returns per unit of risk. Mentor Capital is currently generating about 0.01 per unit of risk. If you would invest  975.00  in Ford Motor on December 26, 2024 and sell it today you would earn a total of  54.00  from holding Ford Motor or generate 5.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Mentor Capital

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.

Mentor Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mentor Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Mentor Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ford and Mentor Capital

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

The idea behind Ford Motor and Mentor Capital 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.