Correlation Between Ford and CHINA OIL

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

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

Diversification Opportunities for Ford and CHINA OIL

0.31

Correlation Coefficient

Ford  CHINA OIL

Weak diversification

The 3 months correlation between Ford and CHINA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and CHINA OIL AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA OIL AND 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 CHINA OIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA OIL AND has no effect on the direction of Ford i.e., Ford and CHINA OIL go up and down completely randomly.

Pair Corralation between Ford and CHINA OIL

Taking into account the 90-day investment horizon Ford is expected to generate 1.11 times less return on investment than CHINA OIL. In addition to that, Ford is 3.56 times more volatile than CHINA OIL AND. It trades about 0.03 of its total potential returns per unit of risk. CHINA OIL AND is currently generating about 0.12 per unit of volatility. If you would invest  2.20  in CHINA OIL AND on September 3, 2024 and sell it today you would earn a total of  0.10  from holding CHINA OIL AND or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  CHINA OIL AND

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

CHINA OIL AND

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA OIL AND are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CHINA OIL is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and CHINA OIL

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

The idea behind Ford Motor and CHINA OIL AND 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.