Correlation Between Ford and AENA SME

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

By analyzing existing cross correlation between Ford Motor and AENA SME UNSPADR110, you can compare the effects of market volatilities on Ford and AENA SME 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 AENA SME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and AENA SME.

Diversification Opportunities for Ford and AENA SME

0.11

Correlation Coefficient

Ford  AENA SME

Average diversification

The 3 months correlation between Ford and AENA is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and AENA SME UNSPADR110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AENA SME UNSPADR110 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 AENA SME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AENA SME UNSPADR110 has no effect on the direction of Ford i.e., Ford and AENA SME go up and down completely randomly.

Pair Corralation between Ford and AENA SME

Taking into account the 90-day investment horizon Ford is expected to generate 3.41 times less return on investment than AENA SME. In addition to that, Ford is 1.77 times more volatile than AENA SME UNSPADR110. It trades about 0.03 of its total potential returns per unit of risk. AENA SME UNSPADR110 is currently generating about 0.19 per unit of volatility. If you would invest  1,730  in AENA SME UNSPADR110 on September 3, 2024 and sell it today you would earn a total of  250.00  from holding AENA SME UNSPADR110 or generate 14.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  AENA SME UNSPADR110

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.

AENA SME UNSPADR110

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AENA SME UNSPADR110 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AENA SME reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and AENA SME

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

The idea behind Ford Motor and AENA SME UNSPADR110 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..