Correlation Between Ford and Ferrari NV

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

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

Diversification Opportunities for Ford and Ferrari NV

-0.22

Correlation Coefficient

Ford  Ferrari NV

Very good diversification

The 3 months correlation between Ford and Ferrari is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ferrari NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrari NV 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 Ferrari NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrari NV has no effect on the direction of Ford i.e., Ford and Ferrari NV go up and down completely randomly.

Pair Corralation between Ford and Ferrari NV

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.04 times more return on investment than Ferrari NV. However, Ford is 1.04 times more volatile than Ferrari NV. It trades about 0.19 of its potential returns per unit of risk. Ferrari NV is currently generating about -0.27 per unit of risk. If you would invest  1,027  in Ford Motor on August 30, 2024 and sell it today you would earn a total of  83.00  from holding Ford Motor or generate 8.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Ford Motor  vs.  Ferrari NV

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) 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.

Ferrari NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ferrari NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ford and Ferrari NV

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

The idea behind Ford Motor and Ferrari NV 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.