Correlation Between Ford and Asian Pac

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

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

Diversification Opportunities for Ford and Asian Pac

-0.26

Correlation Coefficient

Ford  Asian Pac

Very good diversification

The 3 months correlation between Ford and Asian is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Asian Pac Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Pac Holdings 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 Asian Pac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Pac Holdings has no effect on the direction of Ford i.e., Ford and Asian Pac go up and down completely randomly.

Pair Corralation between Ford and Asian Pac

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Asian Pac. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.84 times less risky than Asian Pac. The stock trades about -0.42 of its potential returns per unit of risk. The Asian Pac Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9.50  in Asian Pac Holdings on September 25, 2024 and sell it today you would earn a total of  0.50  from holding Asian Pac Holdings or generate 5.26% return on investment over 90 days.

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

Ford Motor  vs.  Asian Pac Holdings

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.

Asian Pac Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asian Pac Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Ford and Asian Pac

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

The idea behind Ford Motor and Asian Pac Holdings 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.