Correlation Between Ford and Abax Balanced

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

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

Diversification Opportunities for Ford and Abax Balanced

0.26

Correlation Coefficient

Ford  Abax Balanced

Modest diversification

The 3 months correlation between Ford and Abax is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Abax Balanced Prescient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abax Balanced Prescient 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 Abax Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abax Balanced Prescient has no effect on the direction of Ford i.e., Ford and Abax Balanced go up and down completely randomly.

Pair Corralation between Ford and Abax Balanced

Taking into account the 90-day investment horizon Ford is expected to generate 2.48 times less return on investment than Abax Balanced. In addition to that, Ford is 4.02 times more volatile than Abax Balanced Prescient. It trades about 0.02 of its total potential returns per unit of risk. Abax Balanced Prescient is currently generating about 0.24 per unit of volatility. If you would invest  269.00  in Abax Balanced Prescient on September 5, 2024 and sell it today you would earn a total of  21.00  from holding Abax Balanced Prescient or generate 7.81% 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.  Abax Balanced Prescient

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.

Abax Balanced Prescient

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Abax Balanced Prescient are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Abax Balanced may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and Abax Balanced

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

The idea behind Ford Motor and Abax Balanced Prescient 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..