Correlation Between Ford and B Investments

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

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

Diversification Opportunities for Ford and B Investments

0.3

Correlation Coefficient

Ford  B Investments

Weak diversification

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

Pair Corralation between Ford and B Investments

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the B Investments. In addition to that, Ford is 1.06 times more volatile than B Investments Holding. It trades about -0.01 of its total potential returns per unit of risk. B Investments Holding is currently generating about 0.12 per unit of volatility. If you would invest  2,260  in B Investments Holding on September 15, 2024 and sell it today you would earn a total of  261.00  from holding B Investments Holding or generate 11.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	82.81%
Values	Daily Returns

Ford Motor  vs.  B Investments 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 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.

B Investments Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in B Investments Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, B Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and B Investments

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

The idea behind Ford Motor and B Investments 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.