Correlation Between Ford and Cogelec SA

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

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

Diversification Opportunities for Ford and Cogelec SA

0.24

Correlation Coefficient

Ford  Cogelec SA

Modest diversification

The 3 months correlation between Ford and Cogelec is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cogelec SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogelec SA 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 Cogelec SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogelec SA has no effect on the direction of Ford i.e., Ford and Cogelec SA go up and down completely randomly.

Pair Corralation between Ford and Cogelec SA

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Cogelec SA. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.05 times less risky than Cogelec SA. The stock trades about -0.5 of its potential returns per unit of risk. The Cogelec SA is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  1,620  in Cogelec SA on September 24, 2024 and sell it today you would lose (110.00) from holding Cogelec SA or give up 6.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Ford Motor  vs.  Cogelec SA

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.

Cogelec SA

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cogelec SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cogelec SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Cogelec SA

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

The idea behind Ford Motor and Cogelec SA 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.