Correlation Between Ford and Royal Unibrew

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

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

Diversification Opportunities for Ford and Royal Unibrew

-0.06

Correlation Coefficient

Ford  Royal Unibrew

Good diversification

The 3 months correlation between Ford and Royal is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Royal Unibrew AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Unibrew AS 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 Royal Unibrew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Unibrew AS has no effect on the direction of Ford i.e., Ford and Royal Unibrew go up and down completely randomly.

Pair Corralation between Ford and Royal Unibrew

Taking into account the 90-day investment horizon Ford is expected to generate 2.32 times less return on investment than Royal Unibrew. In addition to that, Ford is 1.49 times more volatile than Royal Unibrew AS. It trades about 0.03 of its total potential returns per unit of risk. Royal Unibrew AS is currently generating about 0.09 per unit of volatility. If you would invest  50,900  in Royal Unibrew AS on December 27, 2024 and sell it today you would earn a total of  3,750  from holding Royal Unibrew AS or generate 7.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Ford Motor  vs.  Royal Unibrew AS

Ford Motor

Risk-Adjusted Performance

Insignificant

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.

Royal Unibrew AS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Unibrew AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Royal Unibrew may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ford and Royal Unibrew

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

The idea behind Ford Motor and Royal Unibrew AS 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 Transaction History module to view history of all your transactions and understand their impact on performance.