Correlation Between Ford and Western Asset

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

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

Diversification Opportunities for Ford and Western Asset

0.06

Correlation Coefficient

Ford  Western Asset

Significant diversification

The 3 months correlation between Ford and Western is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset E has no effect on the direction of Ford i.e., Ford and Western Asset go up and down completely randomly.

Pair Corralation between Ford and Western Asset

Taking into account the 90-day investment horizon Ford Motor is expected to generate 6.49 times more return on investment than Western Asset. However, Ford is 6.49 times more volatile than Western Asset E. It trades about 0.06 of its potential returns per unit of risk. Western Asset E is currently generating about 0.17 per unit of risk. If you would invest  970.00  in Ford Motor on December 24, 2024 and sell it today you would earn a total of  55.00  from holding Ford Motor or generate 5.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Ford Motor  vs.  Western Asset E

Ford Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Western Asset E

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset E are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Western Asset 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 Western Asset

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

The idea behind Ford Motor and Western Asset E 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.