Correlation Between Ford and Victory Supermarket

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

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

Diversification Opportunities for Ford and Victory Supermarket

-0.59

Correlation Coefficient

Ford  Victory Supermarket

Excellent diversification

The 3 months correlation between Ford and Victory is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Victory Supermarket Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Supermarket Chain 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 Victory Supermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Supermarket Chain has no effect on the direction of Ford i.e., Ford and Victory Supermarket go up and down completely randomly.

Pair Corralation between Ford and Victory Supermarket

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Victory Supermarket. In addition to that, Ford is 1.04 times more volatile than Victory Supermarket Chain. It trades about -0.11 of its total potential returns per unit of risk. Victory Supermarket Chain is currently generating about -0.07 per unit of volatility. If you would invest  534,000  in Victory Supermarket Chain on November 29, 2024 and sell it today you would lose (36,300) from holding Victory Supermarket Chain or give up 6.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	84.75%
Values	Daily Returns

Ford Motor  vs.  Victory Supermarket Chain

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Victory Supermarket Chain

Risk-Adjusted Performance

Very Weak

Over the last 90 days Victory Supermarket Chain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ford and Victory Supermarket

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

The idea behind Ford Motor and Victory Supermarket Chain 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 Valuation module to check real value of public entities based on technical and fundamental data.