Correlation Between Ford and SK Growth

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

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

Diversification Opportunities for Ford and SK Growth

0.38

Correlation Coefficient

Ford  SK Growth

Weak diversification

The 3 months correlation between Ford and SKGRU is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and SK Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Growth Opportunities 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 SK Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Growth Opportunities has no effect on the direction of Ford i.e., Ford and SK Growth go up and down completely randomly.

Pair Corralation between Ford and SK Growth

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the SK Growth. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 90.69 times less risky than SK Growth. The stock trades about 0.0 of its potential returns per unit of risk. The SK Growth Opportunities is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,034  in SK Growth Opportunities on October 23, 2024 and sell it today you would earn a total of  147.00  from holding SK Growth Opportunities or generate 14.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	24.7%
Values	Daily Returns

Ford Motor  vs.  SK Growth Opportunities

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.

SK Growth Opportunities

Risk-Adjusted Performance

0 of 100

Market Crasher

Over the last 90 days SK Growth Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively abnormal basic indicators, SK Growth unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and SK Growth

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

The idea behind Ford Motor and SK Growth Opportunities 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .