Correlation Between Ford and Nationwide Destination

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

By analyzing existing cross correlation between Ford Motor and Nationwide Destination 2045, you can compare the effects of market volatilities on Ford and Nationwide Destination 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 Nationwide Destination. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Nationwide Destination.

Diversification Opportunities for Ford and Nationwide Destination

0.73

Correlation Coefficient

Ford  Nationwide Destination

Poor diversification

The 3 months correlation between Ford and Nationwide is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nationwide Destination 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Destination 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 Nationwide Destination. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Destination has no effect on the direction of Ford i.e., Ford and Nationwide Destination go up and down completely randomly.

Pair Corralation between Ford and Nationwide Destination

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.81 times more return on investment than Nationwide Destination. However, Ford Motor is 1.23 times less risky than Nationwide Destination. It trades about -0.09 of its potential returns per unit of risk. Nationwide Destination 2045 is currently generating about -0.15 per unit of risk. If you would invest  1,080  in Ford Motor on October 22, 2024 and sell it today you would lose (62.00) from holding Ford Motor or give up 5.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.5%
Values	Daily Returns

Ford Motor  vs.  Nationwide Destination 2045

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.

Nationwide Destination

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nationwide Destination 2045 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Ford and Nationwide Destination

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

The idea behind Ford Motor and Nationwide Destination 2045 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.