Correlation Between Ford and Pakistan Oilfields

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

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

Diversification Opportunities for Ford and Pakistan Oilfields

-0.7

Correlation Coefficient

Ford  Pakistan Oilfields

Excellent diversification

The 3 months correlation between Ford and Pakistan is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Pakistan Oilfields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Oilfields 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 Pakistan Oilfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Oilfields has no effect on the direction of Ford i.e., Ford and Pakistan Oilfields go up and down completely randomly.

Pair Corralation between Ford and Pakistan Oilfields

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.15 times more return on investment than Pakistan Oilfields. However, Ford is 1.15 times more volatile than Pakistan Oilfields. It trades about 0.13 of its potential returns per unit of risk. Pakistan Oilfields is currently generating about -0.11 per unit of risk. If you would invest  990.00  in Ford Motor on October 24, 2024 and sell it today you would earn a total of  28.00  from holding Ford Motor or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

Ford Motor  vs.  Pakistan Oilfields

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.

Pakistan Oilfields

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Oilfields are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Pakistan Oilfields reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Pakistan Oilfields

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

The idea behind Ford Motor and Pakistan Oilfields 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.