Correlation Between Ford and Guangzhou Ruoyuchen

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

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

Diversification Opportunities for Ford and Guangzhou Ruoyuchen

0.56

Correlation Coefficient

Ford  Guangzhou Ruoyuchen

Very weak diversification

The 3 months correlation between Ford and Guangzhou is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Guangzhou Ruoyuchen Informatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Ruoyuchen 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 Guangzhou Ruoyuchen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Ruoyuchen has no effect on the direction of Ford i.e., Ford and Guangzhou Ruoyuchen go up and down completely randomly.

Pair Corralation between Ford and Guangzhou Ruoyuchen

Taking into account the 90-day investment horizon Ford is expected to generate 7.65 times less return on investment than Guangzhou Ruoyuchen. But when comparing it to its historical volatility, Ford Motor is 1.53 times less risky than Guangzhou Ruoyuchen. It trades about 0.01 of its potential returns per unit of risk. Guangzhou Ruoyuchen Information is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,306  in Guangzhou Ruoyuchen Information on September 5, 2024 and sell it today you would earn a total of  971.00  from holding Guangzhou Ruoyuchen Information or generate 74.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.36%
Values	Daily Returns

Ford Motor  vs.  Guangzhou Ruoyuchen Informatio

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.

Guangzhou Ruoyuchen

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Ruoyuchen Information are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Ruoyuchen sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Guangzhou Ruoyuchen

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

The idea behind Ford Motor and Guangzhou Ruoyuchen Information 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.