Correlation Between Ford and Siit Intermediate

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

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

Diversification Opportunities for Ford and Siit Intermediate

-0.33

Correlation Coefficient

Ford  Siit Intermediate

Very good diversification

The 3 months correlation between Ford and Siit is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Siit Intermediate Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siit Intermediate 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 Siit Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siit Intermediate has no effect on the direction of Ford i.e., Ford and Siit Intermediate go up and down completely randomly.

Pair Corralation between Ford and Siit Intermediate

Taking into account the 90-day investment horizon Ford Motor is expected to generate 5.37 times more return on investment than Siit Intermediate. However, Ford is 5.37 times more volatile than Siit Intermediate Duration. It trades about 0.02 of its potential returns per unit of risk. Siit Intermediate Duration is currently generating about 0.05 per unit of risk. If you would invest  947.00  in Ford Motor on September 17, 2024 and sell it today you would earn a total of  50.50  from holding Ford Motor or generate 5.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Ford Motor  vs.  Siit Intermediate Duration

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.

Siit Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siit Intermediate Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Siit Intermediate 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 Siit Intermediate

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

The idea behind Ford Motor and Siit Intermediate Duration 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.