Correlation Between Ford and NWTN

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

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

Diversification Opportunities for Ford and NWTN

-0.1

Correlation Coefficient

Ford  NWTN

Good diversification

The 3 months correlation between Ford and NWTN is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and NWTN Class B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NWTN Class B and Ford 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 Ford Motor are associated (or correlated) with NWTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NWTN Class B has no effect on the direction of Ford i.e., Ford and NWTN go up and down completely randomly.

Pair Corralation between Ford and NWTN

Given the investment horizon of 90 days Ford Motor is expected to under-perform the NWTN. But the preferred stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 20.8 times less risky than NWTN. The preferred stock trades about -0.14 of its potential returns per unit of risk. The NWTN Class B is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  100.00  in NWTN Class B on September 4, 2024 and sell it today you would earn a total of  15.00  from holding NWTN Class B or generate 15.0% return on investment over 90 days.

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

Ford Motor  vs.  NWTN Class B

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.

NWTN Class B

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NWTN Class B are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, NWTN displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and NWTN

The main advantage of trading using opposite Ford and NWTN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, NWTN 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 NWTN will offset losses from the drop in NWTN's long position.

The idea behind Ford Motor and NWTN Class B 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.