Correlation Between Ford and 65339KCA6

Can any of the company-specific risk be diversified away by investing in both Ford and 65339KCA6 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 65339KCA6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and NEE 3 15 JAN 52, you can compare the effects of market volatilities on Ford and 65339KCA6 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 65339KCA6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and 65339KCA6.

Diversification Opportunities for Ford and 65339KCA6

0.66

Correlation Coefficient

Ford  65339KCA6

Poor diversification

The 3 months correlation between Ford and 65339KCA6 is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and NEE 3 15 JAN 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 65339KCA6 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 65339KCA6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 65339KCA6 has no effect on the direction of Ford i.e., Ford and 65339KCA6 go up and down completely randomly.

Pair Corralation between Ford and 65339KCA6

Taking into account the 90-day investment horizon Ford is expected to generate 1.92 times less return on investment than 65339KCA6. But when comparing it to its historical volatility, Ford Motor is 1.05 times less risky than 65339KCA6. It trades about 0.13 of its potential returns per unit of risk. NEE 3 15 JAN 52 is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  6,264  in NEE 3 15 JAN 52 on October 22, 2024 and sell it today you would earn a total of  352.00  from holding NEE 3 15 JAN 52 or generate 5.62% return on investment over 90 days.

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

Ford Motor  vs.  NEE 3 15 JAN 52

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.

65339KCA6

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NEE 3 15 JAN 52 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 65339KCA6 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 65339KCA6

The main advantage of trading using opposite Ford and 65339KCA6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, 65339KCA6 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 65339KCA6 will offset losses from the drop in 65339KCA6's long position.

The idea behind Ford Motor and NEE 3 15 JAN 52 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.