Correlation Between Ford and NTT Data

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

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

Diversification Opportunities for Ford and NTT Data

0.13

Correlation Coefficient

Ford  NTT Data

Average diversification

The 3 months correlation between Ford and NTT is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and NTT Data Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTT Data Corp 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 NTT Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTT Data Corp has no effect on the direction of Ford i.e., Ford and NTT Data go up and down completely randomly.

Pair Corralation between Ford and NTT Data

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the NTT Data. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.61 times less risky than NTT Data. The stock trades about -0.16 of its potential returns per unit of risk. The NTT Data Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,730  in NTT Data Corp on September 16, 2024 and sell it today you would earn a total of  174.00  from holding NTT Data Corp or generate 10.06% return on investment over 90 days.

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

Ford Motor  vs.  NTT Data Corp

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.

NTT Data Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NTT Data Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, NTT Data showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and NTT Data

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

The idea behind Ford Motor and NTT Data Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.