Correlation Between Ford and FIRST MUTUAL

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

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

Diversification Opportunities for Ford and FIRST MUTUAL

-0.29

Correlation Coefficient

Ford  FIRST MUTUAL

Very good diversification

The 3 months correlation between Ford and FIRST is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and FIRST MUTUAL PROPERTIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST MUTUAL PROPERTIES 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 FIRST MUTUAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST MUTUAL PROPERTIES has no effect on the direction of Ford i.e., Ford and FIRST MUTUAL go up and down completely randomly.

Pair Corralation between Ford and FIRST MUTUAL

Taking into account the 90-day investment horizon Ford is expected to generate 61.45 times less return on investment than FIRST MUTUAL. But when comparing it to its historical volatility, Ford Motor is 3.16 times less risky than FIRST MUTUAL. It trades about 0.01 of its potential returns per unit of risk. FIRST MUTUAL PROPERTIES is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,050,000  in FIRST MUTUAL PROPERTIES on September 28, 2024 and sell it today you would lose (1,037,690) from holding FIRST MUTUAL PROPERTIES or give up 98.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.77%
Values	Daily Returns

Ford Motor  vs.  FIRST MUTUAL PROPERTIES

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.

FIRST MUTUAL PROPERTIES

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST MUTUAL PROPERTIES are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, FIRST MUTUAL demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and FIRST MUTUAL

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

The idea behind Ford Motor and FIRST MUTUAL PROPERTIES 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.