Correlation Between Ford and Sky ICT

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

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

Diversification Opportunities for Ford and Sky ICT

-0.4

Correlation Coefficient

Ford  Sky ICT

Very good diversification

The 3 months correlation between Ford and Sky is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sky ICT Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky ICT Public 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 Sky ICT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky ICT Public has no effect on the direction of Ford i.e., Ford and Sky ICT go up and down completely randomly.

Pair Corralation between Ford and Sky ICT

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Sky ICT. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.91 times less risky than Sky ICT. The stock trades about -0.25 of its potential returns per unit of risk. The Sky ICT Public is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,400  in Sky ICT Public on October 11, 2024 and sell it today you would lose (10.00) from holding Sky ICT Public or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Ford Motor  vs.  Sky ICT Public

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 unfluctuating 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.

Sky ICT Public

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sky ICT Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Sky ICT is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ford and Sky ICT

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

The idea behind Ford Motor and Sky ICT Public 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.