Correlation Between Autoliv and Ford

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

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

Diversification Opportunities for Autoliv and Ford

0.67

Correlation Coefficient

Autoliv  Ford

Poor diversification

The 3 months correlation between Autoliv and Ford is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Autoliv 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 Autoliv 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 Autoliv i.e., Autoliv and Ford go up and down completely randomly.

Pair Corralation between Autoliv and Ford

Considering the 90-day investment horizon Autoliv is expected to generate 2.66 times less return on investment than Ford. In addition to that, Autoliv is 1.01 times more volatile than Ford Motor. It trades about 0.07 of its total potential returns per unit of risk. Ford Motor is currently generating about 0.19 per unit of volatility. If you would invest  1,027  in Ford Motor on August 30, 2024 and sell it today you would earn a total of  83.00  from holding Ford Motor or generate 8.08% return on investment over 90 days.

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

Autoliv  vs.  Ford Motor

Autoliv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Autoliv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Autoliv is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Autoliv and Ford

The main advantage of trading using opposite Autoliv and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autoliv 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 Autoliv 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.