Correlation Between Ford and Sit Balanced

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

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

Diversification Opportunities for Ford and Sit Balanced

-0.24

Correlation Coefficient

Ford  Sit Balanced

Very good diversification

The 3 months correlation between Ford and Sit is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sit Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Balanced 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 Sit Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Balanced has no effect on the direction of Ford i.e., Ford and Sit Balanced go up and down completely randomly.

Pair Corralation between Ford and Sit Balanced

Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.55 times more return on investment than Sit Balanced. However, Ford is 2.55 times more volatile than Sit Balanced Fund. It trades about 0.04 of its potential returns per unit of risk. Sit Balanced Fund is currently generating about -0.09 per unit of risk. If you would invest  959.00  in Ford Motor on December 22, 2024 and sell it today you would earn a total of  41.00  from holding Ford Motor or generate 4.28% 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.  Sit Balanced Fund

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) 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.

Sit Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sit Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sit Balanced 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 Sit Balanced

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

The idea behind Ford Motor and Sit Balanced Fund 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.