Correlation Between Ford and Fuji Electric

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

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

Diversification Opportunities for Ford and Fuji Electric

-0.08

Correlation Coefficient

Ford  Fuji Electric

Good diversification

The 3 months correlation between Ford and Fuji is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Fuji Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuji Electric 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 Fuji Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuji Electric has no effect on the direction of Ford i.e., Ford and Fuji Electric go up and down completely randomly.

Pair Corralation between Ford and Fuji Electric

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Fuji Electric. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.17 times less risky than Fuji Electric. The stock trades about -0.18 of its potential returns per unit of risk. The Fuji Electric Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,424  in Fuji Electric Co on September 12, 2024 and sell it today you would earn a total of  24.00  from holding Fuji Electric Co or generate 1.69% return on investment over 90 days.

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

Ford Motor  vs.  Fuji Electric Co

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) 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.

Fuji Electric

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fuji Electric Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Fuji Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Fuji Electric

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

The idea behind Ford Motor and Fuji Electric Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.