Correlation Between Ford and Generation Alpha

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

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

Diversification Opportunities for Ford and Generation Alpha

0.0

Correlation Coefficient

Ford  Generation Alpha

Pay attention - limited upside

The 3 months correlation between Ford and Generation is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Generation Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generation Alpha 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 Generation Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generation Alpha has no effect on the direction of Ford i.e., Ford and Generation Alpha go up and down completely randomly.

Pair Corralation between Ford and Generation Alpha

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Generation Alpha. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 14.98 times less risky than Generation Alpha. The stock trades about -0.01 of its potential returns per unit of risk. The Generation Alpha is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Generation Alpha on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Generation Alpha or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  Generation Alpha

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.

Generation Alpha

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Generation Alpha are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Generation Alpha disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Generation Alpha

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

The idea behind Ford Motor and Generation Alpha 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 Stocks Directory module to find actively traded stocks across global markets.