Correlation Between Ford and VERBUND AG

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

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

Diversification Opportunities for Ford and VERBUND AG

0.02

Correlation Coefficient

Ford  VERBUND AG

Significant diversification

The 3 months correlation between Ford and VERBUND is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and VERBUND AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VERBUND AG 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 VERBUND AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VERBUND AG has no effect on the direction of Ford i.e., Ford and VERBUND AG go up and down completely randomly.

Pair Corralation between Ford and VERBUND AG

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.21 times more return on investment than VERBUND AG. However, Ford is 1.21 times more volatile than VERBUND AG. It trades about 0.02 of its potential returns per unit of risk. VERBUND AG is currently generating about 0.01 per unit of risk. If you would invest  1,063  in Ford Motor on September 5, 2024 and sell it today you would earn a total of  19.00  from holding Ford Motor or generate 1.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  VERBUND AG

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) 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.

VERBUND AG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VERBUND AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VERBUND AG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and VERBUND AG

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

The idea behind Ford Motor and VERBUND AG 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.