Correlation Between Ford and Roche Holding

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

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

Diversification Opportunities for Ford and Roche Holding

-0.37

Correlation Coefficient

Ford  Roche Holding

Very good diversification

The 3 months correlation between Ford and Roche is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Roche Holding Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding 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 Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding has no effect on the direction of Ford i.e., Ford and Roche Holding go up and down completely randomly.

Pair Corralation between Ford and Roche Holding

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.82 times more return on investment than Roche Holding. However, Ford is 1.82 times more volatile than Roche Holding Ltd. It trades about 0.18 of its potential returns per unit of risk. Roche Holding Ltd is currently generating about -0.38 per unit of risk. If you would invest  1,022  in Ford Motor on September 4, 2024 and sell it today you would earn a total of  76.00  from holding Ford Motor or generate 7.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  Roche Holding Ltd

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Roche Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roche Holding Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ford and Roche Holding

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

The idea behind Ford Motor and Roche Holding Ltd 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.