Correlation Between Ford and BLACK

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

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

Diversification Opportunities for Ford and BLACK

-0.14

Correlation Coefficient

Ford  BLACK

Good diversification

The 3 months correlation between Ford and BLACK is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BLACK HILLS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLACK HILLS P 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 BLACK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLACK HILLS P has no effect on the direction of Ford i.e., Ford and BLACK go up and down completely randomly.

Pair Corralation between Ford and BLACK

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.99 times more return on investment than BLACK. However, Ford Motor is 1.01 times less risky than BLACK. It trades about 0.04 of its potential returns per unit of risk. BLACK HILLS P is currently generating about -0.08 per unit of risk. If you would invest  959.00  in Ford Motor on December 22, 2024 and sell it today you would earn a total of  41.00  from holding Ford Motor or generate 4.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.69%
Values	Daily Returns

Ford Motor  vs.  BLACK HILLS P

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

BLACK HILLS P

Risk-Adjusted Performance

Very Weak

Over the last 90 days BLACK HILLS P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for BLACK HILLS P investors.

Pair Trading with Ford and BLACK

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

The idea behind Ford Motor and BLACK HILLS P 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.