Correlation Between Ford and Wah Nobel

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

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

Diversification Opportunities for Ford and Wah Nobel

0.19

Correlation Coefficient

Ford  Wah Nobel

Average diversification

The 3 months correlation between Ford and Wah is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Wah Nobel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Nobel Chemicals 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 Wah Nobel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Nobel Chemicals has no effect on the direction of Ford i.e., Ford and Wah Nobel go up and down completely randomly.

Pair Corralation between Ford and Wah Nobel

Taking into account the 90-day investment horizon Ford is expected to generate 1.18 times less return on investment than Wah Nobel. But when comparing it to its historical volatility, Ford Motor is 1.21 times less risky than Wah Nobel. It trades about 0.02 of its potential returns per unit of risk. Wah Nobel Chemicals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  22,933  in Wah Nobel Chemicals on September 12, 2024 and sell it today you would earn a total of  126.00  from holding Wah Nobel Chemicals or generate 0.55% return on investment over 90 days.

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

Ford Motor  vs.  Wah Nobel Chemicals

Ford Motor

Risk-Adjusted Performance

1 of 100

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.

Wah Nobel Chemicals

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Nobel Chemicals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Wah Nobel 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 Wah Nobel

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

The idea behind Ford Motor and Wah Nobel Chemicals 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.