Correlation Between Ford and Kimia Farma

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

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

Diversification Opportunities for Ford and Kimia Farma

-0.45

Correlation Coefficient

Ford  Kimia Farma

Very good diversification

The 3 months correlation between Ford and Kimia is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Kimia Farma Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimia Farma Persero 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 Kimia Farma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimia Farma Persero has no effect on the direction of Ford i.e., Ford and Kimia Farma go up and down completely randomly.

Pair Corralation between Ford and Kimia Farma

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.93 times more return on investment than Kimia Farma. However, Ford Motor is 1.07 times less risky than Kimia Farma. It trades about -0.01 of its potential returns per unit of risk. Kimia Farma Persero is currently generating about -0.11 per unit of risk. If you would invest  1,066  in Ford Motor on September 16, 2024 and sell it today you would lose (27.00) from holding Ford Motor or give up 2.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  Kimia Farma Persero

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.

Kimia Farma Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimia Farma Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Ford and Kimia Farma

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

The idea behind Ford Motor and Kimia Farma Persero 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.