Correlation Between Ford and AS Latvijas

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

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

Diversification Opportunities for Ford and AS Latvijas

0.15

Correlation Coefficient

Ford  AS Latvijas

Average diversification

The 3 months correlation between Ford and UM9 is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AS Latvijas balzams in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AS Latvijas balzams 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 AS Latvijas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AS Latvijas balzams has no effect on the direction of Ford i.e., Ford and AS Latvijas go up and down completely randomly.

Pair Corralation between Ford and AS Latvijas

Taking into account the 90-day investment horizon Ford Motor is expected to generate 12.28 times more return on investment than AS Latvijas. However, Ford is 12.28 times more volatile than AS Latvijas balzams. It trades about 0.01 of its potential returns per unit of risk. AS Latvijas balzams is currently generating about -0.01 per unit of risk. If you would invest  969.00  in Ford Motor on September 23, 2024 and sell it today you would earn a total of  19.00  from holding Ford Motor or generate 1.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.54%
Values	Daily Returns

Ford Motor  vs.  AS Latvijas balzams

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.

AS Latvijas balzams

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AS Latvijas balzams are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AS Latvijas 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 AS Latvijas

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

The idea behind Ford Motor and AS Latvijas balzams 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.