Correlation Between Ford and RWE Aktiengesellscha

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

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

Diversification Opportunities for Ford and RWE Aktiengesellscha

0.81

Correlation Coefficient

Ford  RWE Aktiengesellscha

Very poor diversification

The 3 months correlation between Ford and RWE is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and RWE Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE Aktiengesellschaft 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 RWE Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE Aktiengesellschaft has no effect on the direction of Ford i.e., Ford and RWE Aktiengesellscha go up and down completely randomly.

Pair Corralation between Ford and RWE Aktiengesellscha

Taking into account the 90-day investment horizon Ford is expected to generate 1.16 times less return on investment than RWE Aktiengesellscha. But when comparing it to its historical volatility, Ford Motor is 1.68 times less risky than RWE Aktiengesellscha. It trades about 0.13 of its potential returns per unit of risk. RWE Aktiengesellschaft is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,760  in RWE Aktiengesellschaft on October 23, 2024 and sell it today you would earn a total of  80.00  from holding RWE Aktiengesellschaft or generate 2.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.44%
Values	Daily Returns

Ford Motor  vs.  RWE Aktiengesellschaft

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

RWE Aktiengesellschaft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RWE Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ford and RWE Aktiengesellscha

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

The idea behind Ford Motor and RWE Aktiengesellschaft 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 Commodity Directory module to find actively traded commodities issued by global exchanges.