Correlation Between Ford and Mercuries Data

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

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

Diversification Opportunities for Ford and Mercuries Data

0.06

Correlation Coefficient

Ford  Mercuries Data

Significant diversification

The 3 months correlation between Ford and Mercuries is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mercuries Data Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercuries Data Systems 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 Mercuries Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercuries Data Systems has no effect on the direction of Ford i.e., Ford and Mercuries Data go up and down completely randomly.

Pair Corralation between Ford and Mercuries Data

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.25 times more return on investment than Mercuries Data. However, Ford is 1.25 times more volatile than Mercuries Data Systems. It trades about 0.03 of its potential returns per unit of risk. Mercuries Data Systems is currently generating about -0.07 per unit of risk. If you would invest  1,083  in Ford Motor on September 2, 2024 and sell it today you would earn a total of  30.00  from holding Ford Motor or generate 2.77% return on investment over 90 days.

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

Ford Motor  vs.  Mercuries Data Systems

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.

Mercuries Data Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercuries Data Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ford and Mercuries Data

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

The idea behind Ford Motor and Mercuries Data Systems 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.