Correlation Between Ford and KROGER

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

By analyzing existing cross correlation between Ford Motor and KROGER 54 percent, you can compare the effects of market volatilities on Ford and KROGER 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 KROGER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and KROGER.

Diversification Opportunities for Ford and KROGER

-0.34

Correlation Coefficient

Ford  KROGER

Very good diversification

The 3 months correlation between Ford and KROGER is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and KROGER 54 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KROGER 54 percent 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 KROGER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KROGER 54 percent has no effect on the direction of Ford i.e., Ford and KROGER go up and down completely randomly.

Pair Corralation between Ford and KROGER

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.92 times more return on investment than KROGER. However, Ford is 1.92 times more volatile than KROGER 54 percent. It trades about 0.04 of its potential returns per unit of risk. KROGER 54 percent is currently generating about 0.0 per unit of risk. If you would invest  957.00  in Ford Motor on December 29, 2024 and sell it today you would earn a total of  33.00  from holding Ford Motor or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.02%
Values	Daily Returns

Ford Motor  vs.  KROGER 54 percent

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

KROGER 54 percent

Risk-Adjusted Performance

Very Weak

Over the last 90 days KROGER 54 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KROGER 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 KROGER

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

The idea behind Ford Motor and KROGER 54 percent 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.