Correlation Between Ford and Ares Acquisition

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

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

Diversification Opportunities for Ford and Ares Acquisition

0.28

Correlation Coefficient

Ford  Ares Acquisition

Modest diversification

The 3 months correlation between Ford and Ares is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Acquisition 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 Ares Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Acquisition has no effect on the direction of Ford i.e., Ford and Ares Acquisition go up and down completely randomly.

Pair Corralation between Ford and Ares Acquisition

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Ares Acquisition. In addition to that, Ford is 4.41 times more volatile than Ares Acquisition. It trades about -0.05 of its total potential returns per unit of risk. Ares Acquisition is currently generating about 0.01 per unit of volatility. If you would invest  1,090  in Ares Acquisition on September 18, 2024 and sell it today you would earn a total of  1.00  from holding Ares Acquisition or generate 0.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Ares Acquisition

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Ares Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ares Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Ares Acquisition is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Ares Acquisition

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

The idea behind Ford Motor and Ares Acquisition 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.