Correlation Between Ford and Plazza AG

Can any of the company-specific risk be diversified away by investing in both Ford and Plazza 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 Plazza 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 Plazza AG, you can compare the effects of market volatilities on Ford and Plazza 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 Plazza AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Plazza AG.

Diversification Opportunities for Ford and Plazza AG

-0.44

Correlation Coefficient

Ford  Plazza AG

Very good diversification

The 3 months correlation between Ford and Plazza is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Plazza AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plazza 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 Plazza AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plazza AG has no effect on the direction of Ford i.e., Ford and Plazza AG go up and down completely randomly.

Pair Corralation between Ford and Plazza AG

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Plazza AG. In addition to that, Ford is 4.97 times more volatile than Plazza AG. It trades about -0.04 of its total potential returns per unit of risk. Plazza AG is currently generating about 0.16 per unit of volatility. If you would invest  30,100  in Plazza AG on October 9, 2024 and sell it today you would earn a total of  3,800  from holding Plazza AG or generate 12.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.79%
Values	Daily Returns

Ford Motor  vs.  Plazza AG

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Plazza AG

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Plazza AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Plazza AG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ford and Plazza AG

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

The idea behind Ford Motor and Plazza 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.