Correlation Between Ford and Mainstay Government

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

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

Diversification Opportunities for Ford and Mainstay Government

0.06

Correlation Coefficient

Ford  Mainstay Government

Significant diversification

The 3 months correlation between Ford and Mainstay is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mainstay Government Liquidity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Government 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 Mainstay Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Government has no effect on the direction of Ford i.e., Ford and Mainstay Government go up and down completely randomly.

Pair Corralation between Ford and Mainstay Government

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.61 times more return on investment than Mainstay Government. However, Ford Motor is 1.65 times less risky than Mainstay Government. It trades about 0.01 of its potential returns per unit of risk. Mainstay Government Liquidity is currently generating about -0.02 per unit of risk. If you would invest  988.00  in Ford Motor on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Ford Motor or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Ford Motor  vs.  Mainstay Government Liquidity

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 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.

Mainstay Government

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Government Liquidity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mainstay Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Mainstay Government

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

The idea behind Ford Motor and Mainstay Government Liquidity 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.