Correlation Between Ford and DIC Holdings

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

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

Diversification Opportunities for Ford and DIC Holdings

0.24

Correlation Coefficient

Ford  DIC Holdings

Modest diversification

The 3 months correlation between Ford and DIC is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and DIC Holdings Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIC Holdings Construction 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 DIC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIC Holdings Construction has no effect on the direction of Ford i.e., Ford and DIC Holdings go up and down completely randomly.

Pair Corralation between Ford and DIC Holdings

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the DIC Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.55 times less risky than DIC Holdings. The stock trades about -0.04 of its potential returns per unit of risk. The DIC Holdings Construction is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,085,000  in DIC Holdings Construction on September 16, 2024 and sell it today you would earn a total of  245,000  from holding DIC Holdings Construction or generate 22.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.73%
Values	Daily Returns

Ford Motor  vs.  DIC Holdings Construction

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.

DIC Holdings Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DIC Holdings Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIC Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and DIC Holdings

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

The idea behind Ford Motor and DIC Holdings Construction 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.