Correlation Between LiveWire and Ford

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

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

Diversification Opportunities for LiveWire and Ford

0.25

Correlation Coefficient

LiveWire  Ford

Modest diversification

The 3 months correlation between LiveWire and Ford is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding LiveWire Group and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and LiveWire 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 LiveWire Group 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 LiveWire i.e., LiveWire and Ford go up and down completely randomly.

Pair Corralation between LiveWire and Ford

Given the investment horizon of 90 days LiveWire Group is expected to generate 7.6 times more return on investment than Ford. However, LiveWire is 7.6 times more volatile than Ford Motor. It trades about 0.02 of its potential returns per unit of risk. Ford Motor is currently generating about -0.1 per unit of risk. If you would invest  604.00  in LiveWire Group on September 3, 2024 and sell it today you would lose (4.00) from holding LiveWire Group or give up 0.66% of portfolio value over 90 days.

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

LiveWire Group  vs.  Ford Motor

LiveWire Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LiveWire Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, LiveWire is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail 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 somewhat strong basic indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LiveWire and Ford

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