Correlation Between Ford and Materion

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

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

Diversification Opportunities for Ford and Materion

0.84

Correlation Coefficient

Ford  Materion

Very poor diversification

The 3 months correlation between Ford and Materion is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Materion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materion 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 Materion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materion has no effect on the direction of Ford i.e., Ford and Materion go up and down completely randomly.

Pair Corralation between Ford and Materion

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.88 times more return on investment than Materion. However, Ford Motor is 1.14 times less risky than Materion. It trades about -0.09 of its potential returns per unit of risk. Materion is currently generating about -0.19 per unit of risk. If you would invest  1,063  in Ford Motor on December 1, 2024 and sell it today you would lose (108.00) from holding Ford Motor or give up 10.16% of portfolio value over 90 days.

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

Ford Motor  vs.  Materion

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Materion

Risk-Adjusted Performance

Very Weak

Over the last 90 days Materion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ford and Materion

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

The idea behind Ford Motor and Materion 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.