Correlation Between Ford and Promateris

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

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

Diversification Opportunities for Ford and Promateris

-0.07

Correlation Coefficient

Ford  Promateris

Good diversification

The 3 months correlation between Ford and Promateris is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Promateris SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Promateris SA 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 Promateris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Promateris SA has no effect on the direction of Ford i.e., Ford and Promateris go up and down completely randomly.

Pair Corralation between Ford and Promateris

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Promateris. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 3.64 times less risky than Promateris. The stock trades about -0.16 of its potential returns per unit of risk. The Promateris SA is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  715.00  in Promateris SA on September 16, 2024 and sell it today you would lose (45.00) from holding Promateris SA or give up 6.29% 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.  Promateris SA

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.

Promateris SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Promateris SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Promateris is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Promateris

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

The idea behind Ford Motor and Promateris SA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.