Correlation Between Ford and Warner Bros

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

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

Diversification Opportunities for Ford and Warner Bros

0.14

Correlation Coefficient

Ford  Warner Bros

Average diversification

The 3 months correlation between Ford and Warner is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Warner Bros Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Bros Discovery 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 Warner Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Bros Discovery has no effect on the direction of Ford i.e., Ford and Warner Bros go up and down completely randomly.

Pair Corralation between Ford and Warner Bros

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.77 times more return on investment than Warner Bros. However, Ford Motor is 1.29 times less risky than Warner Bros. It trades about 0.05 of its potential returns per unit of risk. Warner Bros Discovery is currently generating about 0.03 per unit of risk. If you would invest  975.00  in Ford Motor on December 26, 2024 and sell it today you would earn a total of  54.00  from holding Ford Motor or generate 5.54% 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.  Warner Bros Discovery

Ford Motor

Risk-Adjusted Performance

Insignificant

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.

Warner Bros Discovery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Warner Bros is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and Warner Bros

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

The idea behind Ford Motor and Warner Bros Discovery 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.