Correlation Between MAHLE Metal and Ford

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

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

Diversification Opportunities for MAHLE Metal and Ford

-0.34

Correlation Coefficient

MAHLE Metal  Ford

Very good diversification

The 3 months correlation between MAHLE and Ford is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding MAHLE Metal Leve and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and MAHLE Metal 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 MAHLE Metal Leve 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 MAHLE Metal i.e., MAHLE Metal and Ford go up and down completely randomly.

Pair Corralation between MAHLE Metal and Ford

Assuming the 90 days trading horizon MAHLE Metal Leve is expected to generate 0.64 times more return on investment than Ford. However, MAHLE Metal Leve is 1.55 times less risky than Ford. It trades about 0.04 of its potential returns per unit of risk. Ford Motor is currently generating about -0.04 per unit of risk. If you would invest  2,746  in MAHLE Metal Leve on December 30, 2024 and sell it today you would earn a total of  89.00  from holding MAHLE Metal Leve or generate 3.24% return on investment over 90 days.

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

MAHLE Metal Leve  vs.  Ford Motor

MAHLE Metal Leve

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MAHLE Metal Leve are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MAHLE Metal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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. Despite somewhat strong primary indicators, Ford is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MAHLE Metal and Ford

The main advantage of trading using opposite MAHLE Metal and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAHLE Metal 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 MAHLE Metal Leve 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.