Correlation Between Ford and ONE Enterprise

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

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

Diversification Opportunities for Ford and ONE Enterprise

-0.47

Correlation Coefficient

Ford  ONE Enterprise

Very good diversification

The 3 months correlation between Ford and ONE is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and The ONE Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONE Enterprise 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 ONE Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONE Enterprise has no effect on the direction of Ford i.e., Ford and ONE Enterprise go up and down completely randomly.

Pair Corralation between Ford and ONE Enterprise

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the ONE Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.09 times less risky than ONE Enterprise. The stock trades about -0.06 of its potential returns per unit of risk. The The ONE Enterprise is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  396.00  in The ONE Enterprise on October 25, 2024 and sell it today you would lose (30.00) from holding The ONE Enterprise or give up 7.58% of portfolio value over 90 days.

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

Ford Motor  vs.  The ONE Enterprise

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.

ONE Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The ONE Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Ford and ONE Enterprise

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

The idea behind Ford Motor and The ONE Enterprise 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.