Correlation Between Ford and AURUBIS

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

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

Diversification Opportunities for Ford and AURUBIS

-0.12

Correlation Coefficient

Ford  AURUBIS

Good diversification

The 3 months correlation between Ford and AURUBIS is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AURUBIS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AURUBIS 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 AURUBIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AURUBIS has no effect on the direction of Ford i.e., Ford and AURUBIS go up and down completely randomly.

Pair Corralation between Ford and AURUBIS

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.11 times more return on investment than AURUBIS. However, Ford is 1.11 times more volatile than AURUBIS. It trades about -0.22 of its potential returns per unit of risk. AURUBIS is currently generating about -0.48 per unit of risk. If you would invest  1,060  in Ford Motor on October 9, 2024 and sell it today you would lose (68.00) from holding Ford Motor or give up 6.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

Ford Motor  vs.  AURUBIS

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

AURUBIS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AURUBIS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, AURUBIS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and AURUBIS

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

The idea behind Ford Motor and AURUBIS 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.