Correlation Between Ford and Uniform Industrial

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

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

Diversification Opportunities for Ford and Uniform Industrial

0.1

Correlation Coefficient

Ford  Uniform Industrial

Average diversification

The 3 months correlation between Ford and Uniform is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Uniform Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uniform Industrial 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 Uniform Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uniform Industrial Corp has no effect on the direction of Ford i.e., Ford and Uniform Industrial go up and down completely randomly.

Pair Corralation between Ford and Uniform Industrial

Taking into account the 90-day investment horizon Ford is expected to generate 2.61 times less return on investment than Uniform Industrial. But when comparing it to its historical volatility, Ford Motor is 1.4 times less risky than Uniform Industrial. It trades about 0.01 of its potential returns per unit of risk. Uniform Industrial Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,470  in Uniform Industrial Corp on September 21, 2024 and sell it today you would earn a total of  105.00  from holding Uniform Industrial Corp or generate 4.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Ford Motor  vs.  Uniform Industrial Corp

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.

Uniform Industrial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uniform Industrial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Ford and Uniform Industrial

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

The idea behind Ford Motor and Uniform Industrial 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.