Correlation Between Ford and Oakmark Select

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

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

Diversification Opportunities for Ford and Oakmark Select

0.3

Correlation Coefficient

Ford  Oakmark Select

Weak diversification

The 3 months correlation between Ford and Oakmark is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Oakmark Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark Select 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 Oakmark Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oakmark Select has no effect on the direction of Ford i.e., Ford and Oakmark Select go up and down completely randomly.

Pair Corralation between Ford and Oakmark Select

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Oakmark Select. In addition to that, Ford is 1.48 times more volatile than Oakmark Select. It trades about -0.5 of its total potential returns per unit of risk. Oakmark Select is currently generating about -0.3 per unit of volatility. If you would invest  8,494  in Oakmark Select on September 25, 2024 and sell it today you would lose (481.00) from holding Oakmark Select or give up 5.66% of portfolio value over 90 days.

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

Ford Motor  vs.  Oakmark Select

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.

Oakmark Select

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oakmark Select are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Oakmark Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and Oakmark Select

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

The idea behind Ford Motor and Oakmark Select 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.