Correlation Between Subaru Corp and Ford

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

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

Diversification Opportunities for Subaru Corp and Ford

-0.41

Correlation Coefficient

Subaru Corp  Ford

Very good diversification

The 3 months correlation between Subaru and Ford is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Subaru Corp ADR and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Subaru Corp 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 Subaru Corp ADR 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 Subaru Corp i.e., Subaru Corp and Ford go up and down completely randomly.

Pair Corralation between Subaru Corp and Ford

Assuming the 90 days horizon Subaru Corp ADR is expected to generate 0.79 times more return on investment than Ford. However, Subaru Corp ADR is 1.26 times less risky than Ford. It trades about 0.03 of its potential returns per unit of risk. Ford Motor is currently generating about 0.0 per unit of risk. If you would invest  738.00  in Subaru Corp ADR on October 3, 2024 and sell it today you would earn a total of  152.00  from holding Subaru Corp ADR or generate 20.6% return on investment over 90 days.

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

Subaru Corp ADR  vs.  Ford Motor

Subaru Corp ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Subaru Corp ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Subaru Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Subaru Corp and Ford

The main advantage of trading using opposite Subaru Corp and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Subaru Corp 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 Subaru Corp ADR 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.