Correlation Between Ford and BLUESCOPE STEEL

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

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

Diversification Opportunities for Ford and BLUESCOPE STEEL

0.22

Correlation Coefficient

Ford  BLUESCOPE STEEL

Modest diversification

The 3 months correlation between Ford and BLUESCOPE is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BLUESCOPE STEEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLUESCOPE STEEL 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 BLUESCOPE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLUESCOPE STEEL has no effect on the direction of Ford i.e., Ford and BLUESCOPE STEEL go up and down completely randomly.

Pair Corralation between Ford and BLUESCOPE STEEL

Taking into account the 90-day investment horizon Ford is expected to generate 3.31 times less return on investment than BLUESCOPE STEEL. But when comparing it to its historical volatility, Ford Motor is 1.13 times less risky than BLUESCOPE STEEL. It trades about 0.03 of its potential returns per unit of risk. BLUESCOPE STEEL is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,199  in BLUESCOPE STEEL on September 3, 2024 and sell it today you would earn a total of  151.00  from holding BLUESCOPE STEEL or generate 12.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  BLUESCOPE STEEL

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

BLUESCOPE STEEL

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BLUESCOPE STEEL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BLUESCOPE STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and BLUESCOPE STEEL

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

The idea behind Ford Motor and BLUESCOPE STEEL 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.