Correlation Between Ford and Senior Connect

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

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

Diversification Opportunities for Ford and Senior Connect

-0.5

Correlation Coefficient

Ford  Senior Connect

Very good diversification

The 3 months correlation between Ford and Senior is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Senior Connect Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senior Connect Acqui 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 Senior Connect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senior Connect Acqui has no effect on the direction of Ford i.e., Ford and Senior Connect go up and down completely randomly.

Pair Corralation between Ford and Senior Connect

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.1 times more return on investment than Senior Connect. However, Ford Motor is 9.94 times less risky than Senior Connect. It trades about 0.01 of its potential returns per unit of risk. Senior Connect Acquisition is currently generating about -0.08 per unit of risk. If you would invest  1,148  in Ford Motor on September 3, 2024 and sell it today you would lose (35.00) from holding Ford Motor or give up 3.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	16.57%
Values	Daily Returns

Ford Motor  vs.  Senior Connect Acquisition

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Senior Connect Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Senior Connect Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical indicators, Senior Connect is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ford and Senior Connect

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

The idea behind Ford Motor and Senior Connect Acquisition 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.