Correlation Between Ford and PPG INDUSTRIES

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

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

Diversification Opportunities for Ford and PPG INDUSTRIES

0.39

Correlation Coefficient

Ford  PPG INDUSTRIES

Weak diversification

The 3 months correlation between Ford and PPG is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and PPG INDUSTRIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG INDUSTRIES 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 PPG INDUSTRIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG INDUSTRIES has no effect on the direction of Ford i.e., Ford and PPG INDUSTRIES go up and down completely randomly.

Pair Corralation between Ford and PPG INDUSTRIES

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.18 times more return on investment than PPG INDUSTRIES. However, Ford is 1.18 times more volatile than PPG INDUSTRIES. It trades about 0.02 of its potential returns per unit of risk. PPG INDUSTRIES is currently generating about -0.1 per unit of risk. If you would invest  965.00  in Ford Motor on December 17, 2024 and sell it today you would earn a total of  8.00  from holding Ford Motor or generate 0.83% 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.  PPG INDUSTRIES

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) 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.

PPG INDUSTRIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days PPG INDUSTRIES 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 PPG INDUSTRIES

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

The idea behind Ford Motor and PPG INDUSTRIES 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.