Correlation Between Ford and Philippine Seven

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

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

Diversification Opportunities for Ford and Philippine Seven

0.46

Correlation Coefficient

Ford  Philippine Seven

Very weak diversification

The 3 months correlation between Ford and Philippine is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Philippine Seven Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Seven Corp 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 Philippine Seven. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Seven Corp has no effect on the direction of Ford i.e., Ford and Philippine Seven go up and down completely randomly.

Pair Corralation between Ford and Philippine Seven

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.04 times more return on investment than Philippine Seven. However, Ford is 1.04 times more volatile than Philippine Seven Corp. It trades about -0.06 of its potential returns per unit of risk. Philippine Seven Corp is currently generating about -0.07 per unit of risk. If you would invest  1,092  in Ford Motor on October 25, 2024 and sell it today you would lose (89.00) from holding Ford Motor or give up 8.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.67%
Values	Daily Returns

Ford Motor  vs.  Philippine Seven Corp

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.

Philippine Seven Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philippine Seven Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic 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 Philippine Seven

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

The idea behind Ford Motor and Philippine Seven Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.