Correlation Between Ford and AB SKF

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

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

Diversification Opportunities for Ford and AB SKF

-0.51

Correlation Coefficient

Ford  AB SKF

Excellent diversification

The 3 months correlation between Ford and SKFA is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF 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 AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of Ford i.e., Ford and AB SKF go up and down completely randomly.

Pair Corralation between Ford and AB SKF

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the AB SKF. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.94 times less risky than AB SKF. The stock trades about 0.0 of its potential returns per unit of risk. The AB SKF is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,076  in AB SKF on October 10, 2024 and sell it today you would earn a total of  766.00  from holding AB SKF or generate 71.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Ford Motor  vs.  AB SKF

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 abnormal 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.

AB SKF

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AB SKF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, AB SKF may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and AB SKF

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

The idea behind Ford Motor and AB SKF 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.