Correlation Between Ford and Gevo

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

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

Diversification Opportunities for Ford and Gevo

-0.14

Correlation Coefficient

Ford  Gevo

Good diversification

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

Pair Corralation between Ford and Gevo

Taking into account the 90-day investment horizon Ford is expected to generate 7.11 times less return on investment than Gevo. But when comparing it to its historical volatility, Ford Motor is 4.42 times less risky than Gevo. It trades about 0.02 of its potential returns per unit of risk. Gevo Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  143.00  in Gevo Inc on December 17, 2024 and sell it today you would lose (9.00) from holding Gevo Inc or give up 6.29% of portfolio value over 90 days.

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

Ford Motor  vs.  Gevo Inc

Ford Motor

Risk-Adjusted Performance

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

Gevo Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gevo Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gevo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Gevo

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

The idea behind Ford Motor and Gevo Inc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.