Correlation Between Ford and Biome Grow

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

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

Diversification Opportunities for Ford and Biome Grow

0.2

Correlation Coefficient

Ford  Biome Grow

Modest diversification

The 3 months correlation between Ford and Biome is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Biome Grow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biome Grow 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 Biome Grow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biome Grow has no effect on the direction of Ford i.e., Ford and Biome Grow go up and down completely randomly.

Pair Corralation between Ford and Biome Grow

Taking into account the 90-day investment horizon Ford is expected to generate 214.02 times less return on investment than Biome Grow. But when comparing it to its historical volatility, Ford Motor is 18.31 times less risky than Biome Grow. It trades about 0.01 of its potential returns per unit of risk. Biome Grow is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.75  in Biome Grow on September 14, 2024 and sell it today you would lose (0.37) from holding Biome Grow or give up 49.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.75%
Values	Daily Returns

Ford Motor  vs.  Biome Grow

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.

Biome Grow

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Biome Grow are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Biome Grow reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Biome Grow

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

The idea behind Ford Motor and Biome Grow 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.