Correlation Between Ford and Rompetrol Well

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

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

Diversification Opportunities for Ford and Rompetrol Well

-0.23

Correlation Coefficient

Ford  Rompetrol Well

Very good diversification

The 3 months correlation between Ford and Rompetrol is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Rompetrol Well in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rompetrol Well 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 Rompetrol Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rompetrol Well has no effect on the direction of Ford i.e., Ford and Rompetrol Well go up and down completely randomly.

Pair Corralation between Ford and Rompetrol Well

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.07 times more return on investment than Rompetrol Well. However, Ford is 1.07 times more volatile than Rompetrol Well. It trades about 0.04 of its potential returns per unit of risk. Rompetrol Well is currently generating about 0.03 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	Insignificant
Accuracy	96.67%
Values	Daily Returns

Ford Motor  vs.  Rompetrol Well

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.

Rompetrol Well

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rompetrol Well are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Rompetrol Well 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 Rompetrol Well

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

The idea behind Ford Motor and Rompetrol Well 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.