Correlation Between Ford and Nexoptic Technology

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

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

Diversification Opportunities for Ford and Nexoptic Technology

-0.26

Correlation Coefficient

Ford  Nexoptic Technology

Very good diversification

The 3 months correlation between Ford and Nexoptic is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nexoptic Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexoptic Technology 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 Nexoptic Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexoptic Technology Corp has no effect on the direction of Ford i.e., Ford and Nexoptic Technology go up and down completely randomly.

Pair Corralation between Ford and Nexoptic Technology

Taking into account the 90-day investment horizon Ford is expected to generate 26.98 times less return on investment than Nexoptic Technology. But when comparing it to its historical volatility, Ford Motor is 9.74 times less risky than Nexoptic Technology. It trades about 0.03 of its potential returns per unit of risk. Nexoptic Technology Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Nexoptic Technology Corp on December 27, 2024 and sell it today you would lose (0.50) from holding Nexoptic Technology Corp or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Ford Motor  vs.  Nexoptic Technology Corp

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.

Nexoptic Technology Corp

Risk-Adjusted Performance

Modest

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

Pair Trading with Ford and Nexoptic Technology

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

The idea behind Ford Motor and Nexoptic Technology 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.