Correlation Between Ford and Marketing Worldwide

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

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

Diversification Opportunities for Ford and Marketing Worldwide

-0.11

Correlation Coefficient

Ford  Marketing Worldwide

Good diversification

The 3 months correlation between Ford and Marketing is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Marketing Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marketing Worldwide 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 Marketing Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marketing Worldwide has no effect on the direction of Ford i.e., Ford and Marketing Worldwide go up and down completely randomly.

Pair Corralation between Ford and Marketing Worldwide

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Marketing Worldwide. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 23.49 times less risky than Marketing Worldwide. The stock trades about -0.01 of its potential returns per unit of risk. The Marketing Worldwide is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Marketing Worldwide on September 15, 2024 and sell it today you would lose (0.01) from holding Marketing Worldwide or give up 33.33% of portfolio value over 90 days.

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

Ford Motor  vs.  Marketing Worldwide

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.

Marketing Worldwide

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marketing Worldwide are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Marketing Worldwide exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Marketing Worldwide

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

The idea behind Ford Motor and Marketing Worldwide 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.