Correlation Between Ford and Balanced Fund

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

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

Diversification Opportunities for Ford and Balanced Fund

0.03

Correlation Coefficient

Ford  Balanced Fund

Significant diversification

The 3 months correlation between Ford and Balanced is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Balanced Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Class 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 Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Class has no effect on the direction of Ford i.e., Ford and Balanced Fund go up and down completely randomly.

Pair Corralation between Ford and Balanced Fund

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Balanced Fund. In addition to that, Ford is 4.5 times more volatile than Balanced Fund Class. It trades about -0.05 of its total potential returns per unit of risk. Balanced Fund Class is currently generating about 0.15 per unit of volatility. If you would invest  2,887  in Balanced Fund Class on September 18, 2024 and sell it today you would earn a total of  124.00  from holding Balanced Fund Class or generate 4.3% return on investment over 90 days.

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

Ford Motor  vs.  Balanced Fund Class

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.

Balanced Fund Class

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Class are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Balanced Fund

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

The idea behind Ford Motor and Balanced Fund Class 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.