Correlation Between Ford and Avance Gas

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

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

Diversification Opportunities for Ford and Avance Gas

0.46

Correlation Coefficient

Ford  Avance Gas

Very weak diversification

The 3 months correlation between Ford and Avance is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Avance Gas Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avance Gas Holding 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 Avance Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avance Gas Holding has no effect on the direction of Ford i.e., Ford and Avance Gas go up and down completely randomly.

Pair Corralation between Ford and Avance Gas

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.16 times more return on investment than Avance Gas. However, Ford Motor is 6.3 times less risky than Avance Gas. It trades about -0.48 of its potential returns per unit of risk. Avance Gas Holding is currently generating about -0.16 per unit of risk. If you would invest  1,140  in Ford Motor on September 24, 2024 and sell it today you would lose (152.00) from holding Ford Motor or give up 13.33% of portfolio value over 90 days.

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

Ford Motor  vs.  Avance Gas Holding

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.

Avance Gas Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avance Gas Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ford and Avance Gas

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

The idea behind Ford Motor and Avance Gas Holding 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.