Correlation Between Faraday Future and Ford

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

By analyzing existing cross correlation between Faraday Future Intelligent and Ford Motor, you can compare the effects of market volatilities on Faraday Future and Ford 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 Faraday Future with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Future and Ford.

Diversification Opportunities for Faraday Future and Ford

-0.19

Correlation Coefficient

Faraday Future  Ford

Good diversification

The 3 months correlation between Faraday and Ford is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Future Intelligent and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Faraday Future 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 Faraday Future Intelligent are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Faraday Future i.e., Faraday Future and Ford go up and down completely randomly.

Pair Corralation between Faraday Future and Ford

Assuming the 90 days horizon Faraday Future Intelligent is expected to generate 19.57 times more return on investment than Ford. However, Faraday Future is 19.57 times more volatile than Ford Motor. It trades about 0.01 of its potential returns per unit of risk. Ford Motor is currently generating about -0.16 per unit of risk. If you would invest  6.45  in Faraday Future Intelligent on December 28, 2024 and sell it today you would lose (2.06) from holding Faraday Future Intelligent or give up 31.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.05%
Values	Daily Returns

Faraday Future Intelligent  vs.  Ford Motor

Faraday Future Intel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Faraday Future Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal technical and fundamental indicators, Faraday Future may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ford Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Preferred Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Faraday Future and Ford

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

The idea behind Faraday Future Intelligent and Ford Motor 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.