Correlation Between Ford and Innovator Equity

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

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

Diversification Opportunities for Ford and Innovator Equity

0.54

Correlation Coefficient

Ford  Innovator Equity

Very weak diversification

The 3 months correlation between Ford and Innovator is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Innovator Equity Accelerated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Acc 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 Innovator Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Acc has no effect on the direction of Ford i.e., Ford and Innovator Equity go up and down completely randomly.

Pair Corralation between Ford and Innovator Equity

Taking into account the 90-day investment horizon Ford is expected to generate 1.71 times less return on investment than Innovator Equity. In addition to that, Ford is 6.23 times more volatile than Innovator Equity Accelerated. It trades about 0.02 of its total potential returns per unit of risk. Innovator Equity Accelerated is currently generating about 0.22 per unit of volatility. If you would invest  3,279  in Innovator Equity Accelerated on September 3, 2024 and sell it today you would earn a total of  152.00  from holding Innovator Equity Accelerated or generate 4.64% return on investment over 90 days.

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

Ford Motor  vs.  Innovator Equity Accelerated

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Innovator Equity Acc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Equity Accelerated are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking indicators, Innovator Equity is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ford and Innovator Equity

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

The idea behind Ford Motor and Innovator Equity Accelerated 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.