Correlation Between Ford and Lyxor PEA

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

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

Diversification Opportunities for Ford and Lyxor PEA

-0.12

Correlation Coefficient

Ford  Lyxor PEA

Good diversification

The 3 months correlation between Ford and Lyxor is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Lyxor PEA Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor PEA Nasdaq 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 Lyxor PEA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor PEA Nasdaq has no effect on the direction of Ford i.e., Ford and Lyxor PEA go up and down completely randomly.

Pair Corralation between Ford and Lyxor PEA

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Lyxor PEA. In addition to that, Ford is 1.46 times more volatile than Lyxor PEA Nasdaq. It trades about -0.34 of its total potential returns per unit of risk. Lyxor PEA Nasdaq is currently generating about 0.2 per unit of volatility. If you would invest  7,996  in Lyxor PEA Nasdaq on September 27, 2024 and sell it today you would earn a total of  321.00  from holding Lyxor PEA Nasdaq or generate 4.01% 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.  Lyxor PEA Nasdaq

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.

Lyxor PEA Nasdaq

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor PEA Nasdaq are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lyxor PEA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Lyxor PEA

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

The idea behind Ford Motor and Lyxor PEA Nasdaq 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.