Correlation Between Ford and Universal For

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

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

Diversification Opportunities for Ford and Universal For

-0.17

Correlation Coefficient

Ford  Universal For

Good diversification

The 3 months correlation between Ford and Universal is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Universal For Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal For Paper 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 Universal For. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal For Paper has no effect on the direction of Ford i.e., Ford and Universal For go up and down completely randomly.

Pair Corralation between Ford and Universal For

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Universal For. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.07 times less risky than Universal For. The stock trades about -0.05 of its potential returns per unit of risk. The Universal For Paper is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  46.00  in Universal For Paper on September 28, 2024 and sell it today you would earn a total of  7.00  from holding Universal For Paper or generate 15.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.75%
Values	Daily Returns

Ford Motor  vs.  Universal For Paper

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.

Universal For Paper

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal For Paper are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Universal For is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and Universal For

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

The idea behind Ford Motor and Universal For Paper 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.