Correlation Between Ford and Clean Science

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

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

Diversification Opportunities for Ford and Clean Science

-0.56

Correlation Coefficient

Ford  Clean Science

Excellent diversification

The 3 months correlation between Ford and Clean is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Clean Science and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Science 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 Clean Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Science has no effect on the direction of Ford i.e., Ford and Clean Science go up and down completely randomly.

Pair Corralation between Ford and Clean Science

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.09 times more return on investment than Clean Science. However, Ford is 1.09 times more volatile than Clean Science and. It trades about 0.03 of its potential returns per unit of risk. Clean Science and is currently generating about -0.11 per unit of risk. If you would invest  1,083  in Ford Motor on September 2, 2024 and sell it today you would earn a total of  30.00  from holding Ford Motor or generate 2.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Clean Science and

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.

Clean Science

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Science and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Ford and Clean Science

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

The idea behind Ford Motor and Clean Science and 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.