Correlation Between Ford and CVC Capital

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

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

Diversification Opportunities for Ford and CVC Capital

0.31

Correlation Coefficient

Ford  CVC Capital

Weak diversification

The 3 months correlation between Ford and CVC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and CVC Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Capital Partners 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 CVC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Capital Partners has no effect on the direction of Ford i.e., Ford and CVC Capital go up and down completely randomly.

Pair Corralation between Ford and CVC Capital

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the CVC Capital. In addition to that, Ford is 1.04 times more volatile than CVC Capital Partners. It trades about -0.05 of its total potential returns per unit of risk. CVC Capital Partners is currently generating about 0.08 per unit of volatility. If you would invest  1,987  in CVC Capital Partners on September 19, 2024 and sell it today you would earn a total of  193.00  from holding CVC Capital Partners or generate 9.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Ford Motor  vs.  CVC Capital Partners

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.

CVC Capital Partners

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVC Capital Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, CVC Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and CVC Capital

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

The idea behind Ford Motor and CVC Capital Partners 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.