Correlation Between Ford and Value Equity

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

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

Diversification Opportunities for Ford and Value Equity

0.58

Correlation Coefficient

Ford  Value Equity

Very weak diversification

The 3 months correlation between Ford and Value is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Value Equity Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Equity Institu 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 Value Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Equity Institu has no effect on the direction of Ford i.e., Ford and Value Equity go up and down completely randomly.

Pair Corralation between Ford and Value Equity

Taking into account the 90-day investment horizon Ford is expected to generate 1.62 times less return on investment than Value Equity. In addition to that, Ford is 3.1 times more volatile than Value Equity Institutional. It trades about 0.01 of its total potential returns per unit of risk. Value Equity Institutional is currently generating about 0.08 per unit of volatility. If you would invest  1,698  in Value Equity Institutional on August 31, 2024 and sell it today you would earn a total of  482.00  from holding Value Equity Institutional or generate 28.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Ford Motor  vs.  Value Equity Institutional

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Value Equity Institu

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Value Equity Institutional are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Value Equity may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Ford and Value Equity

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

The idea behind Ford Motor and Value Equity Institutional 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.