Correlation Between Ford and Mgame Corp

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

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

Diversification Opportunities for Ford and Mgame Corp

-0.16

Correlation Coefficient

Ford  Mgame Corp

Good diversification

The 3 months correlation between Ford and Mgame is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mgame Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mgame Corp 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 Mgame Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mgame Corp has no effect on the direction of Ford i.e., Ford and Mgame Corp go up and down completely randomly.

Pair Corralation between Ford and Mgame Corp

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.41 times more return on investment than Mgame Corp. However, Ford Motor is 2.43 times less risky than Mgame Corp. It trades about 0.23 of its potential returns per unit of risk. Mgame Corp is currently generating about -0.12 per unit of risk. If you would invest  1,015  in Ford Motor on September 1, 2024 and sell it today you would earn a total of  98.00  from holding Ford Motor or generate 9.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Mgame Corp

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

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. 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.

Mgame Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mgame Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ford and Mgame Corp

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

The idea behind Ford Motor and Mgame Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.