Correlation Between Ford and INTEL

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

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

Diversification Opportunities for Ford and INTEL

0.37

Correlation Coefficient

Ford  INTEL

Weak diversification

The 3 months correlation between Ford and INTEL is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and INTEL PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTEL PORATION 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 INTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTEL PORATION has no effect on the direction of Ford i.e., Ford and INTEL go up and down completely randomly.

Pair Corralation between Ford and INTEL

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the INTEL. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 2.88 times less risky than INTEL. The stock trades about -0.26 of its potential returns per unit of risk. The INTEL PORATION is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,175  in INTEL PORATION on October 10, 2024 and sell it today you would earn a total of  779.00  from holding INTEL PORATION or generate 9.53% return on investment over 90 days.

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

Ford Motor  vs.  INTEL PORATION

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.

INTEL PORATION

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INTEL PORATION are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, INTEL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ford and INTEL

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

The idea behind Ford Motor and INTEL PORATION 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.