Correlation Between Ford and Newlake Capital

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

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

Diversification Opportunities for Ford and Newlake Capital

0.02

Correlation Coefficient

Ford  Newlake Capital

Significant diversification

The 3 months correlation between Ford and Newlake is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Newlake Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newlake Capital Partners 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 Newlake Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newlake Capital Partners has no effect on the direction of Ford i.e., Ford and Newlake Capital go up and down completely randomly.

Pair Corralation between Ford and Newlake Capital

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Newlake Capital. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.05 times less risky than Newlake Capital. The stock trades about -0.3 of its potential returns per unit of risk. The Newlake Capital Partners is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  1,874  in Newlake Capital Partners on October 4, 2024 and sell it today you would lose (124.00) from holding Newlake Capital Partners or give up 6.62% of portfolio value over 90 days.

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

Ford Motor  vs.  Newlake Capital Partners

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.

Newlake Capital Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newlake Capital Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Ford and Newlake Capital

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

The idea behind Ford Motor and Newlake Capital Partners 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.