Correlation Between Ford and Idemitsu Kosan

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

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

Diversification Opportunities for Ford and Idemitsu Kosan

-0.28

Correlation Coefficient

Ford  Idemitsu Kosan

Very good diversification

The 3 months correlation between Ford and Idemitsu is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Idemitsu Kosan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idemitsu Kosan 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 Idemitsu Kosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idemitsu Kosan has no effect on the direction of Ford i.e., Ford and Idemitsu Kosan go up and down completely randomly.

Pair Corralation between Ford and Idemitsu Kosan

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Idemitsu Kosan. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.62 times less risky than Idemitsu Kosan. The stock trades about -0.02 of its potential returns per unit of risk. The Idemitsu Kosan Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Idemitsu Kosan Co on September 17, 2024 and sell it today you would lose (58.00) from holding Idemitsu Kosan Co or give up 4.14% of portfolio value over 90 days.

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

Ford Motor  vs.  Idemitsu Kosan Co

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 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.

Idemitsu Kosan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Idemitsu Kosan Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Idemitsu Kosan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Idemitsu Kosan

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

The idea behind Ford Motor and Idemitsu Kosan Co 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.