Correlation Between Ford and Celularity

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

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

Diversification Opportunities for Ford and Celularity

0.12

Correlation Coefficient

Ford  Celularity

Average diversification

The 3 months correlation between Ford and Celularity is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Celularity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celularity 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 Celularity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celularity has no effect on the direction of Ford i.e., Ford and Celularity go up and down completely randomly.

Pair Corralation between Ford and Celularity

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Celularity. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 85.23 times less risky than Celularity. The stock trades about -0.01 of its potential returns per unit of risk. The Celularity is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2.30  in Celularity on August 31, 2024 and sell it today you would lose (0.31) from holding Celularity or give up 13.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	66.93%
Values	Daily Returns

Ford Motor  vs.  Celularity

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.

Celularity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Celularity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Celularity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Celularity

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

The idea behind Ford Motor and Celularity 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.