Correlation Between Ford and Jennison Natural

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

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

Diversification Opportunities for Ford and Jennison Natural

0.31

Correlation Coefficient

Ford  Jennison Natural

Weak diversification

The 3 months correlation between Ford and Jennison is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Jennison Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jennison Natural Res 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 Jennison Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jennison Natural Res has no effect on the direction of Ford i.e., Ford and Jennison Natural go up and down completely randomly.

Pair Corralation between Ford and Jennison Natural

Taking into account the 90-day investment horizon Ford is expected to generate 8.16 times less return on investment than Jennison Natural. In addition to that, Ford is 1.93 times more volatile than Jennison Natural Resources. It trades about 0.01 of its total potential returns per unit of risk. Jennison Natural Resources is currently generating about 0.12 per unit of volatility. If you would invest  5,044  in Jennison Natural Resources on September 7, 2024 and sell it today you would earn a total of  403.00  from holding Jennison Natural Resources or generate 7.99% return on investment over 90 days.

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

Ford Motor  vs.  Jennison Natural Resources

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.

Jennison Natural Res

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Ford and Jennison Natural

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

The idea behind Ford Motor and Jennison Natural Resources 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.