Correlation Between Ford and Great Atlantic

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

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

Diversification Opportunities for Ford and Great Atlantic

0.23

Correlation Coefficient

Ford  Great Atlantic

Modest diversification

The 3 months correlation between Ford and Great is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Great Atlantic Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Atlantic Resources 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 Great Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Atlantic Resources has no effect on the direction of Ford i.e., Ford and Great Atlantic go up and down completely randomly.

Pair Corralation between Ford and Great Atlantic

Taking into account the 90-day investment horizon Ford is expected to generate 20.41 times less return on investment than Great Atlantic. But when comparing it to its historical volatility, Ford Motor is 4.73 times less risky than Great Atlantic. It trades about 0.01 of its potential returns per unit of risk. Great Atlantic Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Great Atlantic Resources on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Great Atlantic Resources or generate 0.0% return on investment over 90 days.

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

Ford Motor  vs.  Great Atlantic Resources

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Great Atlantic Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Atlantic Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Great Atlantic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ford and Great Atlantic

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

The idea behind Ford Motor and Great Atlantic Resources 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.