Correlation Between Ford and Performance Trust

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

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

Diversification Opportunities for Ford and Performance Trust

0.15

Correlation Coefficient

Ford  Performance Trust

Average diversification

The 3 months correlation between Ford and Performance is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Performance Trust Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Trust Credit 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 Performance Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Trust Credit has no effect on the direction of Ford i.e., Ford and Performance Trust go up and down completely randomly.

Pair Corralation between Ford and Performance Trust

Taking into account the 90-day investment horizon Ford is expected to generate 5.4 times less return on investment than Performance Trust. In addition to that, Ford is 8.93 times more volatile than Performance Trust Credit. It trades about 0.0 of its total potential returns per unit of risk. Performance Trust Credit is currently generating about 0.13 per unit of volatility. If you would invest  770.00  in Performance Trust Credit on October 26, 2024 and sell it today you would earn a total of  125.00  from holding Performance Trust Credit or generate 16.23% return on investment over 90 days.

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

Ford Motor  vs.  Performance Trust Credit

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.

Performance Trust Credit

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Performance Trust Credit are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Performance Trust 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 Performance Trust

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

The idea behind Ford Motor and Performance Trust Credit 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.