Correlation Between Ford and Siam Steel

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

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

Diversification Opportunities for Ford and Siam Steel

-0.41

Correlation Coefficient

Ford  Siam Steel

Very good diversification

The 3 months correlation between Ford and Siam is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Siam Steel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siam Steel Service 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 Siam Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siam Steel Service has no effect on the direction of Ford i.e., Ford and Siam Steel go up and down completely randomly.

Pair Corralation between Ford and Siam Steel

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Siam Steel. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.05 times less risky than Siam Steel. The stock trades about -0.18 of its potential returns per unit of risk. The Siam Steel Service is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  210.00  in Siam Steel Service on September 13, 2024 and sell it today you would earn a total of  10.00  from holding Siam Steel Service or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Siam Steel Service

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.

Siam Steel Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siam Steel Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Ford and Siam Steel

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

The idea behind Ford Motor and Siam Steel Service 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.