Correlation Between Ford and ORIX JREIT

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

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

Diversification Opportunities for Ford and ORIX JREIT

0.32

Correlation Coefficient

Ford  ORIX JREIT

Weak diversification

The 3 months correlation between Ford and ORIX is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ORIX JREIT INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX JREIT INC 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 ORIX JREIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX JREIT INC has no effect on the direction of Ford i.e., Ford and ORIX JREIT go up and down completely randomly.

Pair Corralation between Ford and ORIX JREIT

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.69 times more return on investment than ORIX JREIT. However, Ford is 1.69 times more volatile than ORIX JREIT INC. It trades about 0.01 of its potential returns per unit of risk. ORIX JREIT INC is currently generating about -0.03 per unit of risk. If you would invest  976.00  in Ford Motor on September 19, 2024 and sell it today you would lose (7.00) from holding Ford Motor or give up 0.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.22%
Values	Daily Returns

Ford Motor  vs.  ORIX JREIT INC

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.

ORIX JREIT INC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ORIX JREIT INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ORIX JREIT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and ORIX JREIT

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

The idea behind Ford Motor and ORIX JREIT INC 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.