Correlation Between Ford and High Arctic

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

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

Diversification Opportunities for Ford and High Arctic

0.06

Correlation Coefficient

Ford  High Arctic

Significant diversification

The 3 months correlation between Ford and High is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and High Arctic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Arctic Energy 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 High Arctic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Arctic Energy has no effect on the direction of Ford i.e., Ford and High Arctic go up and down completely randomly.

Pair Corralation between Ford and High Arctic

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.0 times more return on investment than High Arctic. However, Ford Motor is 1.0 times less risky than High Arctic. It trades about 0.12 of its potential returns per unit of risk. High Arctic Energy is currently generating about -0.05 per unit of risk. If you would invest  1,022  in Ford Motor on September 5, 2024 and sell it today you would earn a total of  52.00  from holding Ford Motor or generate 5.09% return on investment over 90 days.

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

Ford Motor  vs.  High Arctic Energy

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.

High Arctic Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Arctic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ford and High Arctic

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

The idea behind Ford Motor and High Arctic Energy 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.