Correlation Between Ford and Shanghai Sanyou

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

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

Diversification Opportunities for Ford and Shanghai Sanyou

0.35

Correlation Coefficient

Ford  Shanghai Sanyou

Weak diversification

The 3 months correlation between Ford and Shanghai is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Shanghai Sanyou Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Sanyou Medical 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 Shanghai Sanyou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Sanyou Medical has no effect on the direction of Ford i.e., Ford and Shanghai Sanyou go up and down completely randomly.

Pair Corralation between Ford and Shanghai Sanyou

Taking into account the 90-day investment horizon Ford is expected to generate 15.34 times less return on investment than Shanghai Sanyou. But when comparing it to its historical volatility, Ford Motor is 2.01 times less risky than Shanghai Sanyou. It trades about 0.02 of its potential returns per unit of risk. Shanghai Sanyou Medical is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,829  in Shanghai Sanyou Medical on September 12, 2024 and sell it today you would earn a total of  483.00  from holding Shanghai Sanyou Medical or generate 26.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Ford Motor  vs.  Shanghai Sanyou Medical

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.

Shanghai Sanyou Medical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Sanyou Medical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Sanyou sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Shanghai Sanyou

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

The idea behind Ford Motor and Shanghai Sanyou Medical 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.