Correlation Between Ford and RBC Target

Can any of the company-specific risk be diversified away by investing in both Ford and RBC Target 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 Target 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 Target 2027, you can compare the effects of market volatilities on Ford and RBC Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and RBC Target.

Diversification Opportunities for Ford and RBC Target

0.02

Correlation Coefficient

Ford  RBC Target

Significant diversification

The 3 months correlation between Ford and RBC is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and RBC Target 2027 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Target 2027 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Target 2027 has no effect on the direction of Ford i.e., Ford and RBC Target go up and down completely randomly.

Pair Corralation between Ford and RBC Target

Taking into account the 90-day investment horizon Ford Motor is expected to generate 14.45 times more return on investment than RBC Target. However, Ford is 14.45 times more volatile than RBC Target 2027. It trades about 0.05 of its potential returns per unit of risk. RBC Target 2027 is currently generating about 0.08 per unit of risk. If you would invest  975.00  in Ford Motor on December 25, 2024 and sell it today you would earn a total of  53.00  from holding Ford Motor or generate 5.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Ford Motor  vs.  RBC Target 2027

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

RBC Target 2027

Risk-Adjusted Performance

Modest

Over the last 90 days RBC Target 2027 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, RBC Target 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 Target

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

The idea behind Ford Motor and RBC Target 2027 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.