Correlation Between Ford and Columbia Short

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

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

Diversification Opportunities for Ford and Columbia Short

0.19

Correlation Coefficient

Ford  Columbia Short

Average diversification

The 3 months correlation between Ford and Columbia is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Columbia Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Short Duration 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 Columbia Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Short Duration has no effect on the direction of Ford i.e., Ford and Columbia Short go up and down completely randomly.

Pair Corralation between Ford and Columbia Short

Taking into account the 90-day investment horizon Ford Motor is expected to generate 12.92 times more return on investment than Columbia Short. However, Ford is 12.92 times more volatile than Columbia Short Duration. It trades about 0.06 of its potential returns per unit of risk. Columbia Short Duration is currently generating about 0.21 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  58.00  from holding Ford Motor or generate 5.97% 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.  Columbia Short Duration

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.

Columbia Short Duration

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Short Duration are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Columbia Short is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and Columbia Short

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

The idea behind Ford Motor and Columbia Short Duration 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 Channel module to use Commodity Channel Index to analyze current equity momentum.