Correlation Between Ford and Leverage Shares

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

By analyzing existing cross correlation between Ford Motor and Leverage Shares 3x, you can compare the effects of market volatilities on Ford and Leverage Shares 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 Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Leverage Shares.

Diversification Opportunities for Ford and Leverage Shares

0.11

Correlation Coefficient

Ford  Leverage Shares

Average diversification

The 3 months correlation between Ford and Leverage is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Leverage Shares 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 3x 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 Leverage Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leverage Shares 3x has no effect on the direction of Ford i.e., Ford and Leverage Shares go up and down completely randomly.

Pair Corralation between Ford and Leverage Shares

Taking into account the 90-day investment horizon Ford is expected to generate 38.59 times less return on investment than Leverage Shares. But when comparing it to its historical volatility, Ford Motor is 3.34 times less risky than Leverage Shares. It trades about 0.01 of its potential returns per unit of risk. Leverage Shares 3x is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  106.00  in Leverage Shares 3x on September 17, 2024 and sell it today you would earn a total of  400.00  from holding Leverage Shares 3x or generate 377.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.66%
Values	Daily Returns

Ford Motor  vs.  Leverage Shares 3x

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 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.

Leverage Shares 3x

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Leverage Shares unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Leverage Shares

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

The idea behind Ford Motor and Leverage Shares 3x 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.