Correlation Between Ford and Inspirato

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

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

Diversification Opportunities for Ford and Inspirato

-0.23

Correlation Coefficient

Ford  Inspirato

Very good diversification

The 3 months correlation between Ford and Inspirato is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Inspirato in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspirato 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 Inspirato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspirato has no effect on the direction of Ford i.e., Ford and Inspirato go up and down completely randomly.

Pair Corralation between Ford and Inspirato

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.52 times more return on investment than Inspirato. However, Ford Motor is 1.93 times less risky than Inspirato. It trades about 0.03 of its potential returns per unit of risk. Inspirato is currently generating about -0.03 per unit of risk. If you would invest  1,083  in Ford Motor on September 3, 2024 and sell it today you would earn a total of  30.00  from holding Ford Motor or generate 2.77% return on investment over 90 days.

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

Ford Motor  vs.  Inspirato

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

Inspirato

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspirato has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Ford and Inspirato

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

The idea behind Ford Motor and Inspirato 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.