Correlation Between Ford and Russell High

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

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

Diversification Opportunities for Ford and Russell High

-0.35

Correlation Coefficient

Ford  Russell High

Very good diversification

The 3 months correlation between Ford and Russell is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Russell High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell High Dividend 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 Russell High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell High Dividend has no effect on the direction of Ford i.e., Ford and Russell High go up and down completely randomly.

Pair Corralation between Ford and Russell High

Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.02 times more return on investment than Russell High. However, Ford is 3.02 times more volatile than Russell High Dividend. It trades about 0.05 of its potential returns per unit of risk. Russell High Dividend is currently generating about -0.03 per unit of risk. If you would invest  959.00  in Ford Motor on December 21, 2024 and sell it today you would earn a total of  42.00  from holding Ford Motor or generate 4.38% 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.  Russell High Dividend

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) 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.

Russell High Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Russell High Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Russell High is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Russell High

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

The idea behind Ford Motor and Russell High Dividend 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.