Correlation Between Ford and MorphoSys

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

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

Diversification Opportunities for Ford and MorphoSys

0.36

Correlation Coefficient

Ford  MorphoSys

Weak diversification

The 3 months correlation between Ford and MorphoSys is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and MorphoSys AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MorphoSys AG ADR 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 MorphoSys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MorphoSys AG ADR has no effect on the direction of Ford i.e., Ford and MorphoSys go up and down completely randomly.

Pair Corralation between Ford and MorphoSys

Taking into account the 90-day investment horizon Ford is expected to generate 19.72 times less return on investment than MorphoSys. But when comparing it to its historical volatility, Ford Motor is 3.07 times less risky than MorphoSys. It trades about 0.01 of its potential returns per unit of risk. MorphoSys AG ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  399.00  in MorphoSys AG ADR on September 29, 2024 and sell it today you would lose (399.00) from holding MorphoSys AG ADR or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.24%
Values	Daily Returns

Ford Motor  vs.  MorphoSys AG ADR

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.

MorphoSys AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ford and MorphoSys

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

The idea behind Ford Motor and MorphoSys AG ADR 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.