Correlation Between Ford and STAR AFRICA

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

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

Diversification Opportunities for Ford and STAR AFRICA

0.23

Correlation Coefficient

Ford  STAR AFRICA

Modest diversification

The 3 months correlation between Ford and STAR is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and STAR AFRICA PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAR AFRICA PORATION 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 STAR AFRICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STAR AFRICA PORATION has no effect on the direction of Ford i.e., Ford and STAR AFRICA go up and down completely randomly.

Pair Corralation between Ford and STAR AFRICA

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.22 times more return on investment than STAR AFRICA. However, Ford Motor is 4.52 times less risky than STAR AFRICA. It trades about -0.22 of its potential returns per unit of risk. STAR AFRICA PORATION is currently generating about -0.11 per unit of risk. If you would invest  1,041  in Ford Motor on October 12, 2024 and sell it today you would lose (67.00) from holding Ford Motor or give up 6.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Ford Motor  vs.  STAR AFRICA PORATION

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 unfluctuating 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.

STAR AFRICA PORATION

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STAR AFRICA PORATION are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, STAR AFRICA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and STAR AFRICA

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

The idea behind Ford Motor and STAR AFRICA PORATION 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..