Correlation Between Ford and RBC PHN

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

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

Diversification Opportunities for Ford and RBC PHN

0.15

Correlation Coefficient

Ford  RBC PHN

Average diversification

The 3 months correlation between Ford and RBC is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and RBC PHN Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC PHN Short 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 RBC PHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC PHN Short has no effect on the direction of Ford i.e., Ford and RBC PHN go up and down completely randomly.

Pair Corralation between Ford and RBC PHN

Taking into account the 90-day investment horizon Ford Motor is expected to generate 13.11 times more return on investment than RBC PHN. However, Ford is 13.11 times more volatile than RBC PHN Short. It trades about 0.03 of its potential returns per unit of risk. RBC PHN Short is currently generating about 0.18 per unit of risk. If you would invest  971.00  in Ford Motor on December 27, 2024 and sell it today you would earn a total of  19.00  from holding Ford Motor or generate 1.96% return on investment over 90 days.

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

Ford Motor  vs.  RBC PHN Short

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.

RBC PHN Short

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC PHN Short are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RBC PHN 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 RBC PHN

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

The idea behind Ford Motor and RBC PHN Short 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.