Correlation Between Ford and MITECH CoLtd

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

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

Diversification Opportunities for Ford and MITECH CoLtd

-0.09

Correlation Coefficient

Ford  MITECH CoLtd

Good diversification

The 3 months correlation between Ford and MITECH is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and MITECH CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITECH CoLtd 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 MITECH CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITECH CoLtd has no effect on the direction of Ford i.e., Ford and MITECH CoLtd go up and down completely randomly.

Pair Corralation between Ford and MITECH CoLtd

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the MITECH CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.19 times less risky than MITECH CoLtd. The stock trades about -0.05 of its potential returns per unit of risk. The MITECH CoLtd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  760,000  in MITECH CoLtd on September 22, 2024 and sell it today you would earn a total of  55,000  from holding MITECH CoLtd or generate 7.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Ford Motor  vs.  MITECH CoLtd

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. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

MITECH CoLtd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MITECH CoLtd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MITECH CoLtd may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and MITECH CoLtd

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

The idea behind Ford Motor and MITECH CoLtd 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.