Correlation Between Ford and Federated Strategic

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

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

Diversification Opportunities for Ford and Federated Strategic

0.7

Correlation Coefficient

Ford  Federated Strategic

Poor diversification

The 3 months correlation between Ford and Federated is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Federated Strategic Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Strategic Value 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 Federated Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Strategic Value has no effect on the direction of Ford i.e., Ford and Federated Strategic go up and down completely randomly.

Pair Corralation between Ford and Federated Strategic

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Federated Strategic. In addition to that, Ford is 2.26 times more volatile than Federated Strategic Value. It trades about -0.19 of its total potential returns per unit of risk. Federated Strategic Value is currently generating about -0.42 per unit of volatility. If you would invest  624.00  in Federated Strategic Value on September 21, 2024 and sell it today you would lose (44.00) from holding Federated Strategic Value or give up 7.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Federated Strategic Value

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Federated Strategic Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Strategic Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Ford and Federated Strategic

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

The idea behind Ford Motor and Federated Strategic Value 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.