Correlation Between Ford and NOTE AB

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

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

Diversification Opportunities for Ford and NOTE AB

0.61

Correlation Coefficient

Ford  NOTE AB

Poor diversification

The 3 months correlation between Ford and NOTE is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and NOTE AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOTE AB 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 NOTE AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOTE AB has no effect on the direction of Ford i.e., Ford and NOTE AB go up and down completely randomly.

Pair Corralation between Ford and NOTE AB

Taking into account the 90-day investment horizon Ford is expected to generate 3.67 times less return on investment than NOTE AB. In addition to that, Ford is 1.14 times more volatile than NOTE AB. It trades about 0.04 of its total potential returns per unit of risk. NOTE AB is currently generating about 0.16 per unit of volatility. If you would invest  14,800  in NOTE AB on December 28, 2024 and sell it today you would earn a total of  2,640  from holding NOTE AB or generate 17.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Ford Motor  vs.  NOTE AB

Ford Motor

Risk-Adjusted Performance

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.

NOTE AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NOTE AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NOTE AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and NOTE AB

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

The idea behind Ford Motor and NOTE AB 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.