Correlation Between Ford and INGEVITY

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

By analyzing existing cross correlation between Ford Motor and INGEVITY P 3875, you can compare the effects of market volatilities on Ford and INGEVITY 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 INGEVITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and INGEVITY.

Diversification Opportunities for Ford and INGEVITY

0.14

Correlation Coefficient

Ford  INGEVITY

Average diversification

The 3 months correlation between Ford and INGEVITY is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and INGEVITY P 3875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INGEVITY P 3875 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 INGEVITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INGEVITY P 3875 has no effect on the direction of Ford i.e., Ford and INGEVITY go up and down completely randomly.

Pair Corralation between Ford and INGEVITY

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the INGEVITY. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.3 times less risky than INGEVITY. The stock trades about -0.31 of its potential returns per unit of risk. The INGEVITY P 3875 is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  9,261  in INGEVITY P 3875 on September 19, 2024 and sell it today you would lose (952.00) from holding INGEVITY P 3875 or give up 10.28% of portfolio value over 90 days.

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

Ford Motor  vs.  INGEVITY P 3875

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.

INGEVITY P 3875

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INGEVITY P 3875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for INGEVITY P 3875 investors.

Pair Trading with Ford and INGEVITY

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

The idea behind Ford Motor and INGEVITY P 3875 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.