Correlation Between Ford and Sequoia Fund

Can any of the company-specific risk be diversified away by investing in both Ford and Sequoia 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 Sequoia 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 Sequoia Fund Inc, you can compare the effects of market volatilities on Ford and Sequoia 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 Sequoia Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Sequoia Fund.

Diversification Opportunities for Ford and Sequoia Fund

-0.21

Correlation Coefficient

Ford  Sequoia Fund

Very good diversification

The 3 months correlation between Ford and Sequoia is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sequoia Fund Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sequoia Fund 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 Sequoia Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sequoia Fund has no effect on the direction of Ford i.e., Ford and Sequoia Fund go up and down completely randomly.

Pair Corralation between Ford and Sequoia Fund

Taking into account the 90-day investment horizon Ford is expected to generate 1.93 times less return on investment than Sequoia Fund. In addition to that, Ford is 2.2 times more volatile than Sequoia Fund Inc. It trades about 0.02 of its total potential returns per unit of risk. Sequoia Fund Inc is currently generating about 0.07 per unit of volatility. If you would invest  18,777  in Sequoia Fund Inc on December 17, 2024 and sell it today you would earn a total of  696.00  from holding Sequoia Fund Inc or generate 3.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Sequoia Fund Inc

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Sequoia Fund

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sequoia Fund Inc are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sequoia 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 Sequoia Fund

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

The idea behind Ford Motor and Sequoia Fund Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.