Correlation Between Ford and Ultrashort Emerging

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

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

Diversification Opportunities for Ford and Ultrashort Emerging

0.25

Correlation Coefficient

Ford  Ultrashort Emerging

Modest diversification

The 3 months correlation between Ford and Ultrashort is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ultrashort Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Emerging 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 Ultrashort Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Emerging has no effect on the direction of Ford i.e., Ford and Ultrashort Emerging go up and down completely randomly.

Pair Corralation between Ford and Ultrashort Emerging

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Ultrashort Emerging. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.17 times less risky than Ultrashort Emerging. The stock trades about -0.21 of its potential returns per unit of risk. The Ultrashort Emerging Markets is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,339  in Ultrashort Emerging Markets on September 21, 2024 and sell it today you would earn a total of  41.00  from holding Ultrashort Emerging Markets or generate 3.06% 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.  Ultrashort Emerging Markets

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 unfluctuating 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.

Ultrashort Emerging

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort Emerging Markets are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ultrashort Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Ultrashort Emerging

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

The idea behind Ford Motor and Ultrashort Emerging Markets 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 Transaction History module to view history of all your transactions and understand their impact on performance.