Correlation Between Ford and Cleanaway Waste

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

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

Diversification Opportunities for Ford and Cleanaway Waste

-0.16

Correlation Coefficient

Ford  Cleanaway Waste

Good diversification

The 3 months correlation between Ford and Cleanaway is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cleanaway Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleanaway Waste Mana 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 Cleanaway Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleanaway Waste Mana has no effect on the direction of Ford i.e., Ford and Cleanaway Waste go up and down completely randomly.

Pair Corralation between Ford and Cleanaway Waste

Taking into account the 90-day investment horizon Ford is expected to generate 1.13 times less return on investment than Cleanaway Waste. But when comparing it to its historical volatility, Ford Motor is 3.71 times less risky than Cleanaway Waste. It trades about 0.04 of its potential returns per unit of risk. Cleanaway Waste Management is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  162.00  in Cleanaway Waste Management on December 28, 2024 and sell it today you would lose (19.00) from holding Cleanaway Waste Management or give up 11.73% of portfolio value over 90 days.

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

Ford Motor  vs.  Cleanaway Waste Management

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Cleanaway Waste Mana

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cleanaway Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Cleanaway Waste is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and Cleanaway Waste

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

The idea behind Ford Motor and Cleanaway Waste Management 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.