Correlation Between Ford and BlockchainK2 Corp

Can any of the company-specific risk be diversified away by investing in both Ford and BlockchainK2 Corp 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 BlockchainK2 Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and BlockchainK2 Corp, you can compare the effects of market volatilities on Ford and BlockchainK2 Corp 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 BlockchainK2 Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BlockchainK2 Corp.

Diversification Opportunities for Ford and BlockchainK2 Corp

0.23

Correlation Coefficient

Ford  BlockchainK2 Corp

Modest diversification

The 3 months correlation between Ford and BlockchainK2 is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BlockchainK2 Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlockchainK2 Corp 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 BlockchainK2 Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlockchainK2 Corp has no effect on the direction of Ford i.e., Ford and BlockchainK2 Corp go up and down completely randomly.

Pair Corralation between Ford and BlockchainK2 Corp

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the BlockchainK2 Corp. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 5.15 times less risky than BlockchainK2 Corp. The stock trades about -0.01 of its potential returns per unit of risk. The BlockchainK2 Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  11.00  in BlockchainK2 Corp on September 14, 2024 and sell it today you would lose (2.20) from holding BlockchainK2 Corp or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  BlockchainK2 Corp

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

BlockchainK2 Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlockchainK2 Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, BlockchainK2 Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ford and BlockchainK2 Corp

The main advantage of trading using opposite Ford and BlockchainK2 Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BlockchainK2 Corp 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 BlockchainK2 Corp will offset losses from the drop in BlockchainK2 Corp's long position.

The idea behind Ford Motor and BlockchainK2 Corp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.