Correlation Between Ford and Zapp Electric

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

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

Diversification Opportunities for Ford and Zapp Electric

0.53

Correlation Coefficient

Ford  Zapp Electric

Very weak diversification

The 3 months correlation between Ford and Zapp is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Zapp Electric Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zapp Electric Vehicles 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 Zapp Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zapp Electric Vehicles has no effect on the direction of Ford i.e., Ford and Zapp Electric go up and down completely randomly.

Pair Corralation between Ford and Zapp Electric

Given the investment horizon of 90 days Ford Motor is expected to generate 0.14 times more return on investment than Zapp Electric. However, Ford Motor is 7.07 times less risky than Zapp Electric. It trades about -0.11 of its potential returns per unit of risk. Zapp Electric Vehicles is currently generating about -0.23 per unit of risk. If you would invest  2,462  in Ford Motor on September 12, 2024 and sell it today you would lose (103.00) from holding Ford Motor or give up 4.18% of portfolio value over 90 days.

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

Ford Motor  vs.  Zapp Electric Vehicles

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.

Zapp Electric Vehicles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zapp Electric Vehicles has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Ford and Zapp Electric

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

The idea behind Ford Motor and Zapp Electric Vehicles 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.