Correlation Between Ford and SSI Securities

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Can any of the company-specific risk be diversified away by investing in both Ford and SSI Securities 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 SSI Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and SSI Securities Corp, you can compare the effects of market volatilities on Ford and SSI Securities 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 SSI Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and SSI Securities.

Diversification Opportunities for Ford and SSI Securities

FordSSIDiversified AwayFordSSIDiversified Away100%
-0.43
  Correlation Coefficient

Very good diversification

The 3 months correlation between Ford and SSI is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and SSI Securities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSI Securities Corp 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 SSI Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSI Securities Corp has no effect on the direction of Ford i.e., Ford and SSI Securities go up and down completely randomly.

Pair Corralation between Ford and SSI Securities

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the SSI Securities. In addition to that, Ford is 1.36 times more volatile than SSI Securities Corp. It trades about -0.1 of its total potential returns per unit of risk. SSI Securities Corp is currently generating about -0.02 per unit of volatility. If you would invest  2,680,000  in SSI Securities Corp on September 27, 2024 and sell it today you would lose (45,000) from holding SSI Securities Corp or give up 1.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  SSI Securities Corp

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-505
JavaScript chart by amCharts 3.21.15F SSI
       Timeline  
Ford Motor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15NovDecDec1010.51111.5
SSI Securities Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SSI Securities Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, SSI Securities is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecDec23,00024,00025,00026,00027,00028,000

Ford and SSI Securities Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.33-2.49-1.66-0.82-0.01390.791.592.393.19 0.050.100.150.20
JavaScript chart by amCharts 3.21.15F SSI
       Returns  

Pair Trading with Ford and SSI Securities

The main advantage of trading using opposite Ford and SSI Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, SSI Securities 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 SSI Securities will offset losses from the drop in SSI Securities' long position.
The idea behind Ford Motor and SSI Securities Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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