Correlation Between Ford and Archi Indonesia

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

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

Diversification Opportunities for Ford and Archi Indonesia

-0.19

Correlation Coefficient

Ford  Archi Indonesia

Good diversification

The 3 months correlation between Ford and Archi is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Archi Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archi Indonesia Tbk 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 Archi Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archi Indonesia Tbk has no effect on the direction of Ford i.e., Ford and Archi Indonesia go up and down completely randomly.

Pair Corralation between Ford and Archi Indonesia

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Archi Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.14 times less risky than Archi Indonesia. The stock trades about -0.16 of its potential returns per unit of risk. The Archi Indonesia Tbk is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  26,200  in Archi Indonesia Tbk on September 16, 2024 and sell it today you would earn a total of  400.00  from holding Archi Indonesia Tbk or generate 1.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Archi Indonesia Tbk

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 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.

Archi Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archi Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Archi Indonesia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ford and Archi Indonesia

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

The idea behind Ford Motor and Archi Indonesia Tbk 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 Valuation module to check real value of public entities based on technical and fundamental data.