Correlation Between Ford and NMC Health

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

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

Diversification Opportunities for Ford and NMC Health

0.38

Correlation Coefficient

Ford  NMC Health

Weak diversification

The 3 months correlation between Ford and NMC is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and NMC Health PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMC Health PLC 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 NMC Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMC Health PLC has no effect on the direction of Ford i.e., Ford and NMC Health go up and down completely randomly.

Pair Corralation between Ford and NMC Health

If you would invest  969.00  in Ford Motor on September 23, 2024 and sell it today you would earn a total of  19.00  from holding Ford Motor or generate 1.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.37%
Values	Daily Returns

Ford Motor  vs.  NMC Health PLC

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NMC Health PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NMC Health PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, NMC Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and NMC Health

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

The idea behind Ford Motor and NMC Health PLC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.