Correlation Between Ford and Aggressive Growth

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

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

Diversification Opportunities for Ford and Aggressive Growth

0.27

Correlation Coefficient

Ford  Aggressive Growth

Modest diversification

The 3 months correlation between Ford and Aggressive is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aggressive Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth 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 Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Ford i.e., Ford and Aggressive Growth go up and down completely randomly.

Pair Corralation between Ford and Aggressive Growth

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Aggressive Growth. In addition to that, Ford is 1.87 times more volatile than Aggressive Growth Fund. It trades about -0.04 of its total potential returns per unit of risk. Aggressive Growth Fund is currently generating about 0.08 per unit of volatility. If you would invest  5,913  in Aggressive Growth Fund on September 24, 2024 and sell it today you would earn a total of  1,023  from holding Aggressive Growth Fund or generate 17.3% return on investment over 90 days.

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

Ford Motor  vs.  Aggressive Growth Fund

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.

Aggressive Growth

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Growth Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Aggressive Growth 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 Aggressive Growth

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

The idea behind Ford Motor and Aggressive Growth Fund 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.