Correlation Between Ford and Nissan

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

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

Diversification Opportunities for Ford and Nissan

-0.48

Correlation Coefficient

Ford  Nissan

Very good diversification

The 3 months correlation between Ford and Nissan is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nissan Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Motor 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 Nissan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Motor has no effect on the direction of Ford i.e., Ford and Nissan go up and down completely randomly.

Pair Corralation between Ford and Nissan

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.35 times more return on investment than Nissan. However, Ford Motor is 2.9 times less risky than Nissan. It trades about 0.01 of its potential returns per unit of risk. Nissan Motor Co is currently generating about -0.11 per unit of risk. If you would invest  1,002  in Ford Motor on October 25, 2024 and sell it today you would earn a total of  1.00  from holding Ford Motor or generate 0.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Nissan Motor Co

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.

Nissan Motor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nissan Motor Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Nissan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Nissan

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

The idea behind Ford Motor and Nissan Motor Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..