Correlation Between Ford and C21 Investments

Can any of the company-specific risk be diversified away by investing in both Ford and C21 Investments 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 C21 Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and C21 Investments, you can compare the effects of market volatilities on Ford and C21 Investments 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 C21 Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and C21 Investments.

Diversification Opportunities for Ford and C21 Investments

-0.26

Correlation Coefficient

Ford  C21 Investments

Very good diversification

The 3 months correlation between Ford and C21 is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and C21 Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C21 Investments 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 C21 Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C21 Investments has no effect on the direction of Ford i.e., Ford and C21 Investments go up and down completely randomly.

Pair Corralation between Ford and C21 Investments

Taking into account the 90-day investment horizon Ford is expected to generate 4.07 times less return on investment than C21 Investments. But when comparing it to its historical volatility, Ford Motor is 4.09 times less risky than C21 Investments. It trades about 0.03 of its potential returns per unit of risk. C21 Investments is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  24.00  in C21 Investments on September 2, 2024 and sell it today you would lose (1.00) from holding C21 Investments or give up 4.17% of portfolio value over 90 days.

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

Ford Motor  vs.  C21 Investments

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.

C21 Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in C21 Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady forward indicators, C21 Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and C21 Investments

The main advantage of trading using opposite Ford and C21 Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, C21 Investments 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 C21 Investments will offset losses from the drop in C21 Investments' long position.

The idea behind Ford Motor and C21 Investments 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..