Correlation Between Ford and Yong Shun

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

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

Diversification Opportunities for Ford and Yong Shun

-0.31

Correlation Coefficient

Ford  Yong Shun

Very good diversification

The 3 months correlation between Ford and Yong is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Yong Shun Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yong Shun Chemical 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 Yong Shun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yong Shun Chemical has no effect on the direction of Ford i.e., Ford and Yong Shun go up and down completely randomly.

Pair Corralation between Ford and Yong Shun

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.26 times more return on investment than Yong Shun. However, Ford is 1.26 times more volatile than Yong Shun Chemical. It trades about -0.18 of its potential returns per unit of risk. Yong Shun Chemical is currently generating about -0.25 per unit of risk. If you would invest  1,123  in Ford Motor on September 12, 2024 and sell it today you would lose (67.00) from holding Ford Motor or give up 5.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Yong Shun Chemical

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) 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.

Yong Shun Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yong Shun Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Yong Shun is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ford and Yong Shun

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

The idea behind Ford Motor and Yong Shun Chemical 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.