Correlation Between Ford and Nova Fund

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

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

Diversification Opportunities for Ford and Nova Fund

0.24

Correlation Coefficient

Ford  Nova Fund

Modest diversification

The 3 months correlation between Ford and Nova is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nova Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Fund Class 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 Nova Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Fund Class has no effect on the direction of Ford i.e., Ford and Nova Fund go up and down completely randomly.

Pair Corralation between Ford and Nova Fund

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Nova Fund. In addition to that, Ford is 1.02 times more volatile than Nova Fund Class. It trades about -0.26 of its total potential returns per unit of risk. Nova Fund Class is currently generating about -0.1 per unit of volatility. If you would invest  13,631  in Nova Fund Class on October 11, 2024 and sell it today you would lose (441.00) from holding Nova Fund Class or give up 3.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Nova Fund Class

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 latest abnormal 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.

Nova Fund Class

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Fund Class are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Nova Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Nova Fund

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

The idea behind Ford Motor and Nova Fund Class 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.