Correlation Between Ford and 62954HAL2

Can any of the company-specific risk be diversified away by investing in both Ford and 62954HAL2 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 62954HAL2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and NXPI 3125 15 FEB 42, you can compare the effects of market volatilities on Ford and 62954HAL2 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 62954HAL2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and 62954HAL2.

Diversification Opportunities for Ford and 62954HAL2

-0.27

Correlation Coefficient

Ford  62954HAL2

Very good diversification

The 3 months correlation between Ford and 62954HAL2 is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and NXPI 3125 15 FEB 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXPI 3125 15 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 62954HAL2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXPI 3125 15 has no effect on the direction of Ford i.e., Ford and 62954HAL2 go up and down completely randomly.

Pair Corralation between Ford and 62954HAL2

Taking into account the 90-day investment horizon Ford is expected to generate 2.19 times less return on investment than 62954HAL2. But when comparing it to its historical volatility, Ford Motor is 1.19 times less risky than 62954HAL2. It trades about 0.02 of its potential returns per unit of risk. NXPI 3125 15 FEB 42 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,979  in NXPI 3125 15 FEB 42 on December 30, 2024 and sell it today you would earn a total of  235.00  from holding NXPI 3125 15 FEB 42 or generate 3.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	74.19%
Values	Daily Returns

Ford Motor  vs.  NXPI 3125 15 FEB 42

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) 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.

NXPI 3125 15

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NXPI 3125 15 FEB 42 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, 62954HAL2 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ford and 62954HAL2

The main advantage of trading using opposite Ford and 62954HAL2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, 62954HAL2 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 62954HAL2 will offset losses from the drop in 62954HAL2's long position.

The idea behind Ford Motor and NXPI 3125 15 FEB 42 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.