Correlation Between GreenPower and Ford

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

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

Diversification Opportunities for GreenPower and Ford

-0.04

Correlation Coefficient

GreenPower  Ford

Good diversification

The 3 months correlation between GreenPower and Ford is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding GreenPower Motor and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and GreenPower 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 GreenPower Motor 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 GreenPower i.e., GreenPower and Ford go up and down completely randomly.

Pair Corralation between GreenPower and Ford

Allowing for the 90-day total investment horizon GreenPower Motor is expected to generate 13.31 times more return on investment than Ford. However, GreenPower is 13.31 times more volatile than Ford Motor. It trades about 0.05 of its potential returns per unit of risk. Ford Motor is currently generating about -0.11 per unit of risk. If you would invest  91.00  in GreenPower Motor on September 3, 2024 and sell it today you would earn a total of  8.00  from holding GreenPower Motor or generate 8.79% return on investment over 90 days.

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

GreenPower Motor  vs.  Ford Motor

GreenPower Motor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GreenPower Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, GreenPower reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of rather sound basic indicators, Ford is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GreenPower and Ford

The main advantage of trading using opposite GreenPower and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GreenPower 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 GreenPower Motor 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.