Correlation Between Ford and Carlyle

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

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

Diversification Opportunities for Ford and Carlyle

0.23

Correlation Coefficient

Ford  Carlyle

Modest diversification

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

Pair Corralation between Ford and Carlyle

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Carlyle. In addition to that, Ford is 1.97 times more volatile than The Carlyle Group. It trades about -0.05 of its total potential returns per unit of risk. The Carlyle Group is currently generating about -0.09 per unit of volatility. If you would invest  1,953  in The Carlyle Group on September 17, 2024 and sell it today you would lose (120.00) from holding The Carlyle Group or give up 6.14% 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.  The Carlyle Group

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.

Carlyle Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Carlyle Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Carlyle is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ford and Carlyle

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

The idea behind Ford Motor and The Carlyle Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.