Correlation Between Ford and Capital Point

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

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

Diversification Opportunities for Ford and Capital Point

-0.69

Correlation Coefficient

Ford  Capital Point

Excellent diversification

The 3 months correlation between Ford and Capital is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Capital Point in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Point 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 Capital Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Point has no effect on the direction of Ford i.e., Ford and Capital Point go up and down completely randomly.

Pair Corralation between Ford and Capital Point

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Capital Point. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.75 times less risky than Capital Point. The stock trades about -0.42 of its potential returns per unit of risk. The Capital Point is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  4,860  in Capital Point on September 25, 2024 and sell it today you would earn a total of  1,240  from holding Capital Point or generate 25.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.71%
Values	Daily Returns

Ford Motor  vs.  Capital Point

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.

Capital Point

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Point are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Capital Point sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Capital Point

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

The idea behind Ford Motor and Capital Point 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..