Correlation Between Ford and Rocket Internet

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

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

Diversification Opportunities for Ford and Rocket Internet

0.39

Correlation Coefficient

Ford  Rocket Internet

Weak diversification

The 3 months correlation between Ford and Rocket is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Rocket Internet SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket Internet SE 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 Rocket Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket Internet SE has no effect on the direction of Ford i.e., Ford and Rocket Internet go up and down completely randomly.

Pair Corralation between Ford and Rocket Internet

Taking into account the 90-day investment horizon Ford is expected to generate 1.25 times less return on investment than Rocket Internet. But when comparing it to its historical volatility, Ford Motor is 1.09 times less risky than Rocket Internet. It trades about 0.03 of its potential returns per unit of risk. Rocket Internet SE is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,560  in Rocket Internet SE on December 27, 2024 and sell it today you would earn a total of  40.00  from holding Rocket Internet SE or generate 2.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Ford Motor  vs.  Rocket Internet SE

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.

Rocket Internet SE

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Rocket Internet is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Rocket Internet

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

The idea behind Ford Motor and Rocket Internet SE 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.