Correlation Between Ford and Swatch Group

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

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

Diversification Opportunities for Ford and Swatch Group

0.0

Correlation Coefficient

Ford  Swatch Group

Pay attention - limited upside

The 3 months correlation between Ford and Swatch is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and The Swatch Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swatch Group 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 Swatch Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swatch Group has no effect on the direction of Ford i.e., Ford and Swatch Group go up and down completely randomly.

Pair Corralation between Ford and Swatch Group

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Swatch Group. In addition to that, Ford is 15.54 times more volatile than The Swatch Group. It trades about 0.0 of its total potential returns per unit of risk. The Swatch Group is currently generating about 0.05 per unit of volatility. If you would invest  4,586  in The Swatch Group on October 24, 2024 and sell it today you would earn a total of  130.00  from holding The Swatch Group or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.51%
Values	Daily Returns

Ford Motor  vs.  The Swatch Group

Ford Motor

Risk-Adjusted Performance

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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.

Swatch Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Swatch Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Swatch Group is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Swatch Group

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

The idea behind Ford Motor and The Swatch Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.