Correlation Between Ford and Parks America

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

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

Diversification Opportunities for Ford and Parks America

-0.16

Correlation Coefficient

Ford  Parks America

Good diversification

The 3 months correlation between Ford and Parks is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Parks America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parks America 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 Parks America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parks America has no effect on the direction of Ford i.e., Ford and Parks America go up and down completely randomly.

Pair Corralation between Ford and Parks America

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.89 times more return on investment than Parks America. However, Ford Motor is 1.12 times less risky than Parks America. It trades about 0.05 of its potential returns per unit of risk. Parks America is currently generating about -0.01 per unit of risk. If you would invest  975.00  in Ford Motor on December 25, 2024 and sell it today you would earn a total of  50.00  from holding Ford Motor or generate 5.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Parks America

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Parks America

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parks America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, Parks America is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Parks America

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

The idea behind Ford Motor and Parks America 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..