Correlation Between Ford and 05329WAR3

Can any of the company-specific risk be diversified away by investing in both Ford and 05329WAR3 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 05329WAR3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and AN 195 01 AUG 28, you can compare the effects of market volatilities on Ford and 05329WAR3 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 05329WAR3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and 05329WAR3.

Diversification Opportunities for Ford and 05329WAR3

0.68

Correlation Coefficient

Ford  05329WAR3

Poor diversification

The 3 months correlation between Ford and 05329WAR3 is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AN 195 01 AUG 28 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AN 195 01 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 05329WAR3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AN 195 01 has no effect on the direction of Ford i.e., Ford and 05329WAR3 go up and down completely randomly.

Pair Corralation between Ford and 05329WAR3

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the 05329WAR3. In addition to that, Ford is 1.92 times more volatile than AN 195 01 AUG 28. It trades about -0.26 of its total potential returns per unit of risk. AN 195 01 AUG 28 is currently generating about -0.25 per unit of volatility. If you would invest  9,021  in AN 195 01 AUG 28 on October 11, 2024 and sell it today you would lose (345.00) from holding AN 195 01 AUG 28 or give up 3.82% of portfolio value over 90 days.

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

Ford Motor  vs.  AN 195 01 AUG 28

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 abnormal 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.

AN 195 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AN 195 01 AUG 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 05329WAR3 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and 05329WAR3

The main advantage of trading using opposite Ford and 05329WAR3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, 05329WAR3 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 05329WAR3 will offset losses from the drop in 05329WAR3's long position.

The idea behind Ford Motor and AN 195 01 AUG 28 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.