Correlation Between Ford and Aberdeen Asia

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

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

Diversification Opportunities for Ford and Aberdeen Asia

0.03

Correlation Coefficient

Ford  Aberdeen Asia

Significant diversification

The 3 months correlation between Ford and Aberdeen is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Aberdeen Asia Pacificome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Asia Pacificome 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 Aberdeen Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Asia Pacificome has no effect on the direction of Ford i.e., Ford and Aberdeen Asia go up and down completely randomly.

Pair Corralation between Ford and Aberdeen Asia

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Aberdeen Asia. In addition to that, Ford is 4.51 times more volatile than Aberdeen Asia Pacificome. It trades about -0.48 of its total potential returns per unit of risk. Aberdeen Asia Pacificome is currently generating about -0.31 per unit of volatility. If you would invest  1,737  in Aberdeen Asia Pacificome on September 24, 2024 and sell it today you would lose (33.00) from holding Aberdeen Asia Pacificome or give up 1.9% 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.  Aberdeen Asia Pacificome

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Aberdeen Asia Pacificome

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Asia Pacificome has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Aberdeen Asia

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

The idea behind Ford Motor and Aberdeen Asia Pacificome 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.