Correlation Between Ford and Maxim Power

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

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

Diversification Opportunities for Ford and Maxim Power

0.54

Correlation Coefficient

Ford  Maxim Power

Very weak diversification

The 3 months correlation between Ford and Maxim is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Maxim Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxim Power Corp 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 Maxim Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxim Power Corp has no effect on the direction of Ford i.e., Ford and Maxim Power go up and down completely randomly.

Pair Corralation between Ford and Maxim Power

Taking into account the 90-day investment horizon Ford is expected to generate 11.83 times less return on investment than Maxim Power. But when comparing it to its historical volatility, Ford Motor is 1.35 times less risky than Maxim Power. It trades about 0.03 of its potential returns per unit of risk. Maxim Power Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  339.00  in Maxim Power Corp on August 31, 2024 and sell it today you would earn a total of  177.00  from holding Maxim Power Corp or generate 52.21% return on investment over 90 days.

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

Ford Motor  vs.  Maxim Power Corp

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Maxim Power Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Maxim Power Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Maxim Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Maxim Power

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

The idea behind Ford Motor and Maxim Power Corp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.