Correlation Between Ford and EGPT

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

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

Diversification Opportunities for Ford and EGPT

-0.05

Correlation Coefficient

Ford  EGPT

Good diversification

The 3 months correlation between Ford and EGPT is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and EGPT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EGPT 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 EGPT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EGPT has no effect on the direction of Ford i.e., Ford and EGPT go up and down completely randomly.

Pair Corralation between Ford and EGPT

If you would invest  2,148  in EGPT on September 12, 2024 and sell it today you would earn a total of  0.00  from holding EGPT or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	9.09%
Values	Daily Returns

Ford Motor  vs.  EGPT

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.

EGPT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EGPT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, EGPT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and EGPT

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

The idea behind Ford Motor and EGPT 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.