Correlation Between Ford and GALP ENERGIA

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

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

Diversification Opportunities for Ford and GALP ENERGIA

-0.41

Correlation Coefficient

Ford  GALP ENERGIA

Very good diversification

The 3 months correlation between Ford and GALP is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and GALP ENERGIA B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GALP ENERGIA B 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 GALP ENERGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GALP ENERGIA B has no effect on the direction of Ford i.e., Ford and GALP ENERGIA go up and down completely randomly.

Pair Corralation between Ford and GALP ENERGIA

Taking into account the 90-day investment horizon Ford is expected to generate 1.41 times less return on investment than GALP ENERGIA. In addition to that, Ford is 1.09 times more volatile than GALP ENERGIA B . It trades about 0.02 of its total potential returns per unit of risk. GALP ENERGIA B is currently generating about 0.04 per unit of volatility. If you would invest  1,409  in GALP ENERGIA B on September 21, 2024 and sell it today you would earn a total of  242.00  from holding GALP ENERGIA B or generate 17.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Ford Motor  vs.  GALP ENERGIA B

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.

GALP ENERGIA B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GALP ENERGIA B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, GALP ENERGIA is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and GALP ENERGIA

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

The idea behind Ford Motor and GALP ENERGIA B 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 CEOs Directory module to screen CEOs from public companies around the world.