Correlation Between Ford and Pacific West

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

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

Diversification Opportunities for Ford and Pacific West

0.0

Correlation Coefficient

Ford  Pacific West

Pay attention - limited upside

The 3 months correlation between Ford and Pacific is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Pacific West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific West Bancorp 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 Pacific West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific West Bancorp has no effect on the direction of Ford i.e., Ford and Pacific West go up and down completely randomly.

Pair Corralation between Ford and Pacific West

Taking into account the 90-day investment horizon Ford is expected to generate 2.71 times less return on investment than Pacific West. But when comparing it to its historical volatility, Ford Motor is 2.13 times less risky than Pacific West. It trades about 0.02 of its potential returns per unit of risk. Pacific West Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,100  in Pacific West Bancorp on October 26, 2024 and sell it today you would earn a total of  10.00  from holding Pacific West Bancorp or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Ford Motor  vs.  Pacific West Bancorp

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.

Pacific West Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific West Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental drivers, Pacific West may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and Pacific West

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

The idea behind Ford Motor and Pacific West Bancorp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.