Correlation Between Ford and Centrex Metals

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

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

Diversification Opportunities for Ford and Centrex Metals

0.11

Correlation Coefficient

Ford  Centrex Metals

Average diversification

The 3 months correlation between Ford and Centrex is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Centrex Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrex Metals 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 Centrex Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrex Metals has no effect on the direction of Ford i.e., Ford and Centrex Metals go up and down completely randomly.

Pair Corralation between Ford and Centrex Metals

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.41 times more return on investment than Centrex Metals. However, Ford Motor is 2.46 times less risky than Centrex Metals. It trades about -0.02 of its potential returns per unit of risk. Centrex Metals is currently generating about -0.25 per unit of risk. If you would invest  1,042  in Ford Motor on September 28, 2024 and sell it today you would lose (40.00) from holding Ford Motor or give up 3.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Ford Motor  vs.  Centrex Metals

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.

Centrex Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centrex Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ford and Centrex Metals

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

The idea behind Ford Motor and Centrex Metals 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.