Correlation Between Ford and Us Defensive

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

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

Diversification Opportunities for Ford and Us Defensive

0.58

Correlation Coefficient

Ford  Us Defensive

Very weak diversification

The 3 months correlation between Ford and REUYX is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Us Defensive Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Defensive Equity 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 Us Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Defensive Equity has no effect on the direction of Ford i.e., Ford and Us Defensive go up and down completely randomly.

Pair Corralation between Ford and Us Defensive

Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.5 times more return on investment than Us Defensive. However, Ford is 2.5 times more volatile than Us Defensive Equity. It trades about 0.17 of its potential returns per unit of risk. Us Defensive Equity is currently generating about 0.17 per unit of risk. If you would invest  1,033  in Ford Motor on August 31, 2024 and sell it today you would earn a total of  77.00  from holding Ford Motor or generate 7.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Us Defensive Equity

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

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.

Us Defensive Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Defensive Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Us Defensive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Us Defensive

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

The idea behind Ford Motor and Us Defensive Equity 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.