Correlation Between Ford and Pollard Banknote

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

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

Diversification Opportunities for Ford and Pollard Banknote

-0.09

Correlation Coefficient

Ford  Pollard Banknote

Good diversification

The 3 months correlation between Ford and Pollard is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Pollard Banknote Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pollard Banknote 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 Pollard Banknote. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pollard Banknote has no effect on the direction of Ford i.e., Ford and Pollard Banknote go up and down completely randomly.

Pair Corralation between Ford and Pollard Banknote

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.59 times more return on investment than Pollard Banknote. However, Ford Motor is 1.69 times less risky than Pollard Banknote. It trades about -0.01 of its potential returns per unit of risk. Pollard Banknote Limited is currently generating about -0.02 per unit of risk. If you would invest  1,184  in Ford Motor on September 1, 2024 and sell it today you would lose (71.00) from holding Ford Motor or give up 6.0% of portfolio value over 90 days.

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

Ford Motor  vs.  Pollard Banknote Limited

Ford Motor

Risk-Adjusted Performance

2 of 100

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.

Pollard Banknote

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pollard Banknote Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Pollard Banknote is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Pollard Banknote

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

The idea behind Ford Motor and Pollard Banknote Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.