Correlation Between Ford and Sapporo Holdings

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

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

Diversification Opportunities for Ford and Sapporo Holdings

0.0

Correlation Coefficient

Ford  Sapporo Holdings

Pay attention - limited upside

The 3 months correlation between Ford and Sapporo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sapporo Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapporo Holdings 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 Sapporo Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapporo Holdings has no effect on the direction of Ford i.e., Ford and Sapporo Holdings go up and down completely randomly.

Pair Corralation between Ford and Sapporo Holdings

If you would invest  1,030  in Ford Motor on October 10, 2024 and sell it today you would lose (54.00) from holding Ford Motor or give up 5.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	9.49%
Values	Daily Returns

Ford Motor  vs.  Sapporo Holdings Limited

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.

Sapporo Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapporo Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Sapporo Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and Sapporo Holdings

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

The idea behind Ford Motor and Sapporo Holdings Limited 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.