Correlation Between Ford and Unibap AB

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

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

Diversification Opportunities for Ford and Unibap AB

-0.18

Correlation Coefficient

Ford  Unibap AB

Good diversification

The 3 months correlation between Ford and Unibap is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Unibap AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unibap AB 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 Unibap AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unibap AB has no effect on the direction of Ford i.e., Ford and Unibap AB go up and down completely randomly.

Pair Corralation between Ford and Unibap AB

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.39 times more return on investment than Unibap AB. However, Ford Motor is 2.59 times less risky than Unibap AB. It trades about 0.01 of its potential returns per unit of risk. Unibap AB is currently generating about -0.02 per unit of risk. If you would invest  1,036  in Ford Motor on September 26, 2024 and sell it today you would lose (34.00) from holding Ford Motor or give up 3.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Ford Motor  vs.  Unibap AB

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 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.

Unibap AB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Unibap AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Unibap AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Unibap AB

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

The idea behind Ford Motor and Unibap AB 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 Anywhere module to track or share privately all of your investments from the convenience of any device.