Correlation Between Ford and Battery Future

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

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

Diversification Opportunities for Ford and Battery Future

0.3

Correlation Coefficient

Ford  Battery Future

Weak diversification

The 3 months correlation between Ford and Battery is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Battery Future Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Battery Future Acqui 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 Battery Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Battery Future Acqui has no effect on the direction of Ford i.e., Ford and Battery Future go up and down completely randomly.

Pair Corralation between Ford and Battery Future

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Battery Future. In addition to that, Ford is 7.17 times more volatile than Battery Future Acquisition. It trades about -0.05 of its total potential returns per unit of risk. Battery Future Acquisition is currently generating about 0.13 per unit of volatility. If you would invest  1,103  in Battery Future Acquisition on September 18, 2024 and sell it today you would earn a total of  25.00  from holding Battery Future Acquisition or generate 2.27% 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.  Battery Future 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.

Battery Future Acqui

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Battery Future Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Battery Future is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Battery Future

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

The idea behind Ford Motor and Battery Future 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.