Correlation Between Ford and Jeudan

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

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

Diversification Opportunities for Ford and Jeudan

-0.21

Correlation Coefficient

Ford  Jeudan

Very good diversification

The 3 months correlation between Ford and Jeudan is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Jeudan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeudan 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 Jeudan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeudan has no effect on the direction of Ford i.e., Ford and Jeudan go up and down completely randomly.

Pair Corralation between Ford and Jeudan

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Jeudan. In addition to that, Ford is 1.88 times more volatile than Jeudan. It trades about -0.03 of its total potential returns per unit of risk. Jeudan is currently generating about -0.03 per unit of volatility. If you would invest  21,700  in Jeudan on September 13, 2024 and sell it today you would lose (1,300) from holding Jeudan or give up 5.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.99%
Values	Daily Returns

Ford Motor  vs.  Jeudan

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.

Jeudan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ford and Jeudan

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

The idea behind Ford Motor and Jeudan 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.