Correlation Between Ford and Alien Metals

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

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

Diversification Opportunities for Ford and Alien Metals

0.54

Correlation Coefficient

Ford  Alien Metals

Very weak diversification

The 3 months correlation between Ford and Alien is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Alien Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alien Metals 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 Alien Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alien Metals has no effect on the direction of Ford i.e., Ford and Alien Metals go up and down completely randomly.

Pair Corralation between Ford and Alien Metals

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.49 times more return on investment than Alien Metals. However, Ford Motor is 2.03 times less risky than Alien Metals. It trades about -0.06 of its potential returns per unit of risk. Alien Metals is currently generating about -0.15 per unit of risk. If you would invest  1,109  in Ford Motor on October 24, 2024 and sell it today you would lose (91.00) from holding Ford Motor or give up 8.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

Ford Motor  vs.  Alien Metals

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.

Alien Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alien Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ford and Alien Metals

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

The idea behind Ford Motor and Alien Metals 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.