Correlation Between Ford and Newcity Public

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

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

Diversification Opportunities for Ford and Newcity Public

0.2

Correlation Coefficient

Ford  Newcity Public

Modest diversification

The 3 months correlation between Ford and Newcity is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Newcity Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newcity Public 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 Newcity Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newcity Public has no effect on the direction of Ford i.e., Ford and Newcity Public go up and down completely randomly.

Pair Corralation between Ford and Newcity Public

Taking into account the 90-day investment horizon Ford is expected to generate 151.0 times less return on investment than Newcity Public. But when comparing it to its historical volatility, Ford Motor is 3.16 times less risky than Newcity Public. It trades about 0.0 of its potential returns per unit of risk. Newcity Public is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  138.00  in Newcity Public on December 4, 2024 and sell it today you would earn a total of  82.00  from holding Newcity Public or generate 59.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.17%
Values	Daily Returns

Ford Motor  vs.  Newcity Public

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Newcity Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newcity Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Ford and Newcity Public

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

The idea behind Ford Motor and Newcity Public 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.