Correlation Between Ford and Flutter Entertainment

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

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

Diversification Opportunities for Ford and Flutter Entertainment

-0.59

Correlation Coefficient

Ford  Flutter Entertainment

Excellent diversification

The 3 months correlation between Ford and Flutter is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Flutter Entertainment PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment PLC 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 Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment PLC has no effect on the direction of Ford i.e., Ford and Flutter Entertainment go up and down completely randomly.

Pair Corralation between Ford and Flutter Entertainment

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.89 times more return on investment than Flutter Entertainment. However, Ford Motor is 1.13 times less risky than Flutter Entertainment. It trades about 0.04 of its potential returns per unit of risk. Flutter Entertainment PLC is currently generating about -0.08 per unit of risk. If you would invest  957.00  in Ford Motor on December 28, 2024 and sell it today you would earn a total of  33.00  from holding Ford Motor or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Ford Motor  vs.  Flutter Entertainment PLC

Ford Motor

Risk-Adjusted Performance

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.

Flutter Entertainment PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flutter Entertainment PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ford and Flutter Entertainment

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

The idea behind Ford Motor and Flutter Entertainment PLC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.