Correlation Between Ford and Sports Entertainment

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

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

Diversification Opportunities for Ford and Sports Entertainment

0.16

Correlation Coefficient

Ford  Sports Entertainment

Average diversification

The 3 months correlation between Ford and Sports is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sports Entertainment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Entertainment 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 Sports Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Entertainment has no effect on the direction of Ford i.e., Ford and Sports Entertainment go up and down completely randomly.

Pair Corralation between Ford and Sports Entertainment

Taking into account the 90-day investment horizon Ford is expected to generate 9.56 times less return on investment than Sports Entertainment. But when comparing it to its historical volatility, Ford Motor is 2.15 times less risky than Sports Entertainment. It trades about 0.01 of its potential returns per unit of risk. Sports Entertainment Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Sports Entertainment Group on September 30, 2024 and sell it today you would earn a total of  0.00  from holding Sports Entertainment Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Ford Motor  vs.  Sports Entertainment Group

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.

Sports Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sports Entertainment Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ford and Sports Entertainment

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

The idea behind Ford Motor and Sports Entertainment Group 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.