Correlation Between Ford and Shinhan WTI

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

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

Diversification Opportunities for Ford and Shinhan WTI

-0.14

Correlation Coefficient

Ford  Shinhan WTI

Good diversification

The 3 months correlation between Ford and Shinhan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Shinhan WTI Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan WTI Futures 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 Shinhan WTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan WTI Futures has no effect on the direction of Ford i.e., Ford and Shinhan WTI go up and down completely randomly.

Pair Corralation between Ford and Shinhan WTI

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Shinhan WTI. In addition to that, Ford is 1.07 times more volatile than Shinhan WTI Futures. It trades about -0.01 of its total potential returns per unit of risk. Shinhan WTI Futures is currently generating about 0.03 per unit of volatility. If you would invest  720,000  in Shinhan WTI Futures on September 14, 2024 and sell it today you would earn a total of  15,000  from holding Shinhan WTI Futures or generate 2.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.5%
Values	Daily Returns

Ford Motor  vs.  Shinhan WTI Futures

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Shinhan WTI Futures

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan WTI Futures are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shinhan WTI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Shinhan WTI

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

The idea behind Ford Motor and Shinhan WTI Futures 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.