Correlation Between Ford and British Amer

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

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

Diversification Opportunities for Ford and British Amer

-0.15

Correlation Coefficient

Ford  British Amer

Good diversification

The 3 months correlation between Ford and British is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and biOasis Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on biOasis Technologies 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 British Amer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of biOasis Technologies has no effect on the direction of Ford i.e., Ford and British Amer go up and down completely randomly.

Pair Corralation between Ford and British Amer

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the British Amer. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 83.93 times less risky than British Amer. The stock trades about -0.01 of its potential returns per unit of risk. The biOasis Technologies is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1.00  in biOasis Technologies on September 1, 2024 and sell it today you would earn a total of  125.00  from holding biOasis Technologies or generate 12500.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Ford Motor  vs.  biOasis Technologies

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

biOasis Technologies

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in biOasis Technologies are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, British Amer showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and British Amer

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

The idea behind Ford Motor and biOasis Technologies 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.