Correlation Between Ford and SeqLL Warrant

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

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

Diversification Opportunities for Ford and SeqLL Warrant

-0.13

Correlation Coefficient

Ford  SeqLL Warrant

Good diversification

The 3 months correlation between Ford and SeqLL is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and SeqLL Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SeqLL Warrant 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 SeqLL Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SeqLL Warrant has no effect on the direction of Ford i.e., Ford and SeqLL Warrant go up and down completely randomly.

Pair Corralation between Ford and SeqLL Warrant

Taking into account the 90-day investment horizon Ford is expected to generate 191.98 times less return on investment than SeqLL Warrant. But when comparing it to its historical volatility, Ford Motor is 20.7 times less risky than SeqLL Warrant. It trades about 0.02 of its potential returns per unit of risk. SeqLL Warrant is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3.46  in SeqLL Warrant on September 13, 2024 and sell it today you would earn a total of  3.78  from holding SeqLL Warrant or generate 109.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	21.82%
Values	Daily Returns

Ford Motor  vs.  SeqLL Warrant

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.

SeqLL Warrant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SeqLL Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, SeqLL Warrant 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 SeqLL Warrant

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

The idea behind Ford Motor and SeqLL Warrant 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 Transaction History module to view history of all your transactions and understand their impact on performance.