Correlation Between Ford and Nomura Research

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

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

Diversification Opportunities for Ford and Nomura Research

-0.36

Correlation Coefficient

Ford  Nomura Research

Very good diversification

The 3 months correlation between Ford and Nomura is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nomura Research Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Research Institute 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 Nomura Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Research Institute has no effect on the direction of Ford i.e., Ford and Nomura Research go up and down completely randomly.

Pair Corralation between Ford and Nomura Research

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.07 times more return on investment than Nomura Research. However, Ford is 1.07 times more volatile than Nomura Research Institute. It trades about -0.02 of its potential returns per unit of risk. Nomura Research Institute is currently generating about -0.14 per unit of risk. If you would invest  1,075  in Ford Motor on September 17, 2024 and sell it today you would lose (36.00) from holding Ford Motor or give up 3.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  Nomura Research Institute

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.

Nomura Research Institute

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nomura Research Institute has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ford and Nomura Research

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

The idea behind Ford Motor and Nomura Research Institute 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.