Correlation Between Ford and Carmat

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

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

Diversification Opportunities for Ford and Carmat

0.14

Correlation Coefficient

Ford  Carmat

Average diversification

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

Pair Corralation between Ford and Carmat

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.41 times more return on investment than Carmat. However, Ford Motor is 2.42 times less risky than Carmat. It trades about 0.01 of its potential returns per unit of risk. Carmat is currently generating about -0.06 per unit of risk. If you would invest  988.00  in Ford Motor on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Ford Motor or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.22%
Values	Daily Returns

Ford Motor  vs.  Carmat

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.

Carmat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmat has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Ford and Carmat

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

The idea behind Ford Motor and Carmat 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.