Correlation Between Ford and Globalstar

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

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

Diversification Opportunities for Ford and Globalstar

0.36

Correlation Coefficient

Ford  Globalstar

Weak diversification

The 3 months correlation between Ford and Globalstar is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Globalstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalstar 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 Globalstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalstar has no effect on the direction of Ford i.e., Ford and Globalstar go up and down completely randomly.

Pair Corralation between Ford and Globalstar

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Globalstar. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 2.02 times less risky than Globalstar. The stock trades about -0.01 of its potential returns per unit of risk. The Globalstar is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  105.00  in Globalstar on September 12, 2024 and sell it today you would earn a total of  124.00  from holding Globalstar or generate 118.1% 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.  Globalstar

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.

Globalstar

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globalstar are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Globalstar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Globalstar

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

The idea behind Ford Motor and Globalstar 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.