Correlation Between Ford and 49456BAV3

Can any of the company-specific risk be diversified away by investing in both Ford and 49456BAV3 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 49456BAV3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and KMI 48 01 FEB 33, you can compare the effects of market volatilities on Ford and 49456BAV3 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 49456BAV3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and 49456BAV3.

Diversification Opportunities for Ford and 49456BAV3

0.37

Correlation Coefficient

Ford  49456BAV3

Weak diversification

The 3 months correlation between Ford and 49456BAV3 is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and KMI 48 01 FEB 33 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMI 48 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 49456BAV3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMI 48 01 has no effect on the direction of Ford i.e., Ford and 49456BAV3 go up and down completely randomly.

Pair Corralation between Ford and 49456BAV3

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the 49456BAV3. In addition to that, Ford is 1.36 times more volatile than KMI 48 01 FEB 33. It trades about -0.16 of its total potential returns per unit of risk. KMI 48 01 FEB 33 is currently generating about 0.04 per unit of volatility. If you would invest  9,573  in KMI 48 01 FEB 33 on October 7, 2024 and sell it today you would earn a total of  148.00  from holding KMI 48 01 FEB 33 or generate 1.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.56%
Values	Daily Returns

Ford Motor  vs.  KMI 48 01 FEB 33

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.

KMI 48 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KMI 48 01 FEB 33 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 49456BAV3 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 49456BAV3

The main advantage of trading using opposite Ford and 49456BAV3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, 49456BAV3 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 49456BAV3 will offset losses from the drop in 49456BAV3's long position.

The idea behind Ford Motor and KMI 48 01 FEB 33 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.