Correlation Between Ford and Madison Pacific

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

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

Diversification Opportunities for Ford and Madison Pacific

-0.05

Correlation Coefficient

Ford  Madison Pacific

Good diversification

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

Pair Corralation between Ford and Madison Pacific

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Madison Pacific. In addition to that, Ford is 2.37 times more volatile than Madison Pacific Properties. It trades about -0.13 of its total potential returns per unit of risk. Madison Pacific Properties is currently generating about 0.0 per unit of volatility. If you would invest  450.00  in Madison Pacific Properties on September 7, 2024 and sell it today you would earn a total of  0.00  from holding Madison Pacific Properties or generate 0.0% 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.  Madison Pacific Properties

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.

Madison Pacific Prop

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Pacific Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Madison Pacific may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and Madison Pacific

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

The idea behind Ford Motor and Madison Pacific Properties 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.