Correlation Between Ford and WinMate Communication

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

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

Diversification Opportunities for Ford and WinMate Communication

0.38

Correlation Coefficient

Ford  WinMate Communication

Weak diversification

The 3 months correlation between Ford and WinMate is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and WinMate Communication INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WinMate Communication INC 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 WinMate Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WinMate Communication INC has no effect on the direction of Ford i.e., Ford and WinMate Communication go up and down completely randomly.

Pair Corralation between Ford and WinMate Communication

Taking into account the 90-day investment horizon Ford is expected to generate 2.71 times less return on investment than WinMate Communication. In addition to that, Ford is 1.24 times more volatile than WinMate Communication INC. It trades about 0.03 of its total potential returns per unit of risk. WinMate Communication INC is currently generating about 0.1 per unit of volatility. If you would invest  13,800  in WinMate Communication INC on August 31, 2024 and sell it today you would earn a total of  1,350  from holding WinMate Communication INC or generate 9.78% 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.  WinMate Communication INC

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.

WinMate Communication INC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WinMate Communication INC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, WinMate Communication may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Ford and WinMate Communication

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

The idea behind Ford Motor and WinMate Communication INC 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.