Correlation Between Ford and Seafarer Overseas

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

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

Diversification Opportunities for Ford and Seafarer Overseas

-0.41

Correlation Coefficient

Ford  Seafarer Overseas

Very good diversification

The 3 months correlation between Ford and Seafarer is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Seafarer Overseas Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seafarer Overseas Growth 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 Seafarer Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seafarer Overseas Growth has no effect on the direction of Ford i.e., Ford and Seafarer Overseas go up and down completely randomly.

Pair Corralation between Ford and Seafarer Overseas

Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.05 times more return on investment than Seafarer Overseas. However, Ford is 3.05 times more volatile than Seafarer Overseas Growth. It trades about 0.03 of its potential returns per unit of risk. Seafarer Overseas Growth is currently generating about -0.05 per unit of risk. If you would invest  1,083  in Ford Motor on August 31, 2024 and sell it today you would earn a total of  27.00  from holding Ford Motor or generate 2.49% return on investment over 90 days.

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

Ford Motor  vs.  Seafarer Overseas Growth

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) 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.

Seafarer Overseas Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seafarer Overseas Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Seafarer Overseas 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 Seafarer Overseas

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

The idea behind Ford Motor and Seafarer Overseas Growth 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.