Correlation Between Ford and Nationwide Global

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

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

Diversification Opportunities for Ford and Nationwide Global

0.53

Correlation Coefficient

Ford  Nationwide Global

Very weak diversification

The 3 months correlation between Ford and Nationwide is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nationwide Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Global Equity 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 Nationwide Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Global Equity has no effect on the direction of Ford i.e., Ford and Nationwide Global go up and down completely randomly.

Pair Corralation between Ford and Nationwide Global

Taking into account the 90-day investment horizon Ford is expected to generate 1.97 times less return on investment than Nationwide Global. In addition to that, Ford is 2.76 times more volatile than Nationwide Global Equity. It trades about 0.02 of its total potential returns per unit of risk. Nationwide Global Equity is currently generating about 0.13 per unit of volatility. If you would invest  2,252  in Nationwide Global Equity on September 5, 2024 and sell it today you would earn a total of  136.00  from holding Nationwide Global Equity or generate 6.04% return on investment over 90 days.

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

Ford Motor  vs.  Nationwide Global Equity

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.

Nationwide Global Equity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Global Equity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nationwide Global 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 Nationwide Global

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

The idea behind Ford Motor and Nationwide Global Equity 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.