Correlation Between Ford and Sumeet Industries

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

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

Diversification Opportunities for Ford and Sumeet Industries

0.18

Correlation Coefficient

Ford  Sumeet Industries

Average diversification

The 3 months correlation between Ford and Sumeet is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Sumeet Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumeet Industries 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 Sumeet Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumeet Industries has no effect on the direction of Ford i.e., Ford and Sumeet Industries go up and down completely randomly.

Pair Corralation between Ford and Sumeet Industries

If you would invest  9,780  in Sumeet Industries Limited on September 30, 2024 and sell it today you would earn a total of  0.00  from holding Sumeet Industries Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  Sumeet Industries 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 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.

Sumeet Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumeet Industries Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Sumeet Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Sumeet Industries

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

The idea behind Ford Motor and Sumeet Industries 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.