Correlation Between Ford and DigitalBridge

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

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

Diversification Opportunities for Ford and DigitalBridge

0.23

Correlation Coefficient

Ford  DigitalBridge

Modest diversification

The 3 months correlation between Ford and DigitalBridge is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and DigitalBridge Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalBridge Group 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 DigitalBridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalBridge Group has no effect on the direction of Ford i.e., Ford and DigitalBridge go up and down completely randomly.

Pair Corralation between Ford and DigitalBridge

Taking into account the 90-day investment horizon Ford is expected to generate 10.8 times less return on investment than DigitalBridge. In addition to that, Ford is 2.07 times more volatile than DigitalBridge Group. It trades about 0.0 of its total potential returns per unit of risk. DigitalBridge Group is currently generating about 0.1 per unit of volatility. If you would invest  2,356  in DigitalBridge Group on September 12, 2024 and sell it today you would earn a total of  145.00  from holding DigitalBridge Group or generate 6.15% 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.  DigitalBridge Group

Ford Motor

Risk-Adjusted Performance

0 of 100

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.

DigitalBridge Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DigitalBridge Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, DigitalBridge is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ford and DigitalBridge

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

The idea behind Ford Motor and DigitalBridge Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.