Correlation Between Ford and Msift Mid

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

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

Diversification Opportunities for Ford and Msift Mid

0.22

Correlation Coefficient

Ford  Msift Mid

Modest diversification

The 3 months correlation between Ford and Msift is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Msift Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Msift Mid Cap 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 Msift Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Msift Mid Cap has no effect on the direction of Ford i.e., Ford and Msift Mid go up and down completely randomly.

Pair Corralation between Ford and Msift Mid

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Msift Mid. In addition to that, Ford is 1.11 times more volatile than Msift Mid Cap. It trades about -0.31 of its total potential returns per unit of risk. Msift Mid Cap is currently generating about 0.39 per unit of volatility. If you would invest  1,263  in Msift Mid Cap on September 19, 2024 and sell it today you would earn a total of  166.00  from holding Msift Mid Cap or generate 13.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Msift Mid Cap

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.

Msift Mid Cap

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Msift Mid Cap are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Msift Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Msift Mid

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

The idea behind Ford Motor and Msift Mid Cap 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 Correlations module to find global opportunities by holding instruments from different markets.