Correlation Between Ford and Fundo Investec

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

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

Diversification Opportunities for Ford and Fundo Investec

0.16

Correlation Coefficient

Ford  Fundo Investec

Average diversification

The 3 months correlation between Ford and Fundo is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fundo Investec IMB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundo Investec IMB 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 Fundo Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundo Investec IMB has no effect on the direction of Ford i.e., Ford and Fundo Investec go up and down completely randomly.

Pair Corralation between Ford and Fundo Investec

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Fundo Investec. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.67 times less risky than Fundo Investec. The stock trades about -0.5 of its potential returns per unit of risk. The Fundo Investec IMB is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  5,320  in Fundo Investec IMB on September 25, 2024 and sell it today you would lose (320.00) from holding Fundo Investec IMB or give up 6.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  Fundo Investec IMB

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Fundo Investec IMB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundo Investec IMB has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Ford and Fundo Investec

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

The idea behind Ford Motor and Fundo Investec IMB 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..