Correlation Between Ford and Large Capital

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

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

Diversification Opportunities for Ford and Large Capital

0.26

Correlation Coefficient

Ford  Large Capital

Modest diversification

The 3 months correlation between Ford and Large is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Large Capital Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Capital Growth 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 Large Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Capital Growth has no effect on the direction of Ford i.e., Ford and Large Capital go up and down completely randomly.

Pair Corralation between Ford and Large Capital

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Large Capital. In addition to that, Ford is 2.41 times more volatile than Large Capital Growth. It trades about -0.13 of its total potential returns per unit of risk. Large Capital Growth is currently generating about -0.02 per unit of volatility. If you would invest  2,166  in Large Capital Growth on November 29, 2024 and sell it today you would lose (19.00) from holding Large Capital Growth or give up 0.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Ford Motor  vs.  Large Capital Growth

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.

Large Capital Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Capital Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Large Capital 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 Large Capital

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

The idea behind Ford Motor and Large Capital Growth 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.