Correlation Between Ford and Anyang Iron

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

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

Diversification Opportunities for Ford and Anyang Iron

0.15

Correlation Coefficient

Ford  Anyang Iron

Average diversification

The 3 months correlation between Ford and Anyang is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Anyang Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anyang Iron Steel 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 Anyang Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anyang Iron Steel has no effect on the direction of Ford i.e., Ford and Anyang Iron go up and down completely randomly.

Pair Corralation between Ford and Anyang Iron

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.02 times more return on investment than Anyang Iron. However, Ford is 1.02 times more volatile than Anyang Iron Steel. It trades about 0.01 of its potential returns per unit of risk. Anyang Iron Steel is currently generating about 0.0 per unit of risk. If you would invest  1,148  in Ford Motor on September 3, 2024 and sell it today you would lose (35.00) from holding Ford Motor or give up 3.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.36%
Values	Daily Returns

Ford Motor  vs.  Anyang Iron Steel

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

Anyang Iron Steel

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anyang Iron Steel are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anyang Iron sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Anyang Iron

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

The idea behind Ford Motor and Anyang Iron Steel 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.