Correlation Between Ford and LG Clean

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

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

Diversification Opportunities for Ford and LG Clean

0.13

Correlation Coefficient

Ford  LG Clean

Average diversification

The 3 months correlation between Ford and RENW is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and LG Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Clean Energy 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 LG Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Clean Energy has no effect on the direction of Ford i.e., Ford and LG Clean go up and down completely randomly.

Pair Corralation between Ford and LG Clean

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the LG Clean. In addition to that, Ford is 1.02 times more volatile than LG Clean Energy. It trades about -0.2 of its total potential returns per unit of risk. LG Clean Energy is currently generating about -0.03 per unit of volatility. If you would invest  826.00  in LG Clean Energy on October 16, 2024 and sell it today you would lose (16.00) from holding LG Clean Energy or give up 1.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.31%
Values	Daily Returns

Ford Motor  vs.  LG Clean Energy

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.

LG Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LG Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, LG Clean is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ford and LG Clean

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

The idea behind Ford Motor and LG Clean Energy 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.