Correlation Between Ford and Strattec Security

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

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

Diversification Opportunities for Ford and Strattec Security

-0.07

Correlation Coefficient

Ford  Strattec Security

Good diversification

The 3 months correlation between Ford and Strattec is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Strattec Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strattec Security 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 Strattec Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strattec Security has no effect on the direction of Ford i.e., Ford and Strattec Security go up and down completely randomly.

Pair Corralation between Ford and Strattec Security

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Strattec Security. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.4 times less risky than Strattec Security. The stock trades about -0.03 of its potential returns per unit of risk. The Strattec Security is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,845  in Strattec Security on October 8, 2024 and sell it today you would earn a total of  242.00  from holding Strattec Security or generate 6.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Ford Motor  vs.  Strattec Security

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.

Strattec Security

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Strattec Security are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Strattec Security may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and Strattec Security

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

The idea behind Ford Motor and Strattec Security 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 Stocks Directory module to find actively traded stocks across global markets.