Correlation Between Ford and FibraHotel

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

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

Diversification Opportunities for Ford and FibraHotel

0.35

Correlation Coefficient

Ford  FibraHotel

Weak diversification

The 3 months correlation between Ford and FibraHotel is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel 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 FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Ford i.e., Ford and FibraHotel go up and down completely randomly.

Pair Corralation between Ford and FibraHotel

Given the investment horizon of 90 days Ford Motor is expected to generate 0.94 times more return on investment than FibraHotel. However, Ford Motor is 1.06 times less risky than FibraHotel. It trades about 0.03 of its potential returns per unit of risk. FibraHotel is currently generating about 0.03 per unit of risk. If you would invest  20,416  in Ford Motor on September 12, 2024 and sell it today you would earn a total of  589.00  from holding Ford Motor or generate 2.88% return on investment over 90 days.

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

Ford Motor  vs.  FibraHotel

Ford Motor

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly 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.

FibraHotel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FibraHotel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, FibraHotel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and FibraHotel

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

The idea behind Ford Motor and FibraHotel 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 CEOs Directory module to screen CEOs from public companies around the world.