Correlation Between Ford and Space

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

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

Diversification Opportunities for Ford and Space

-0.09

Correlation Coefficient

Ford  Space

Good diversification

The 3 months correlation between Ford and Space is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Space Com in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Space Com 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 Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Space Com has no effect on the direction of Ford i.e., Ford and Space go up and down completely randomly.

Pair Corralation between Ford and Space

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.43 times more return on investment than Space. However, Ford Motor is 2.31 times less risky than Space. It trades about 0.0 of its potential returns per unit of risk. Space Com is currently generating about -0.07 per unit of risk. If you would invest  1,166  in Ford Motor on October 23, 2024 and sell it today you would lose (148.00) from holding Ford Motor or give up 12.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.73%
Values	Daily Returns

Ford Motor  vs.  Space Com

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.

Space Com

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Space Com has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Space 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 Space

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

The idea behind Ford Motor and Space Com 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.