Correlation Between Ford and Karolinska Development

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

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

Diversification Opportunities for Ford and Karolinska Development

-0.31

Correlation Coefficient

Ford  Karolinska Development

Very good diversification

The 3 months correlation between Ford and Karolinska is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Karolinska Development AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karolinska Development 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 Karolinska Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karolinska Development has no effect on the direction of Ford i.e., Ford and Karolinska Development go up and down completely randomly.

Pair Corralation between Ford and Karolinska Development

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Karolinska Development. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 2.84 times less risky than Karolinska Development. The stock trades about -0.21 of its potential returns per unit of risk. The Karolinska Development AB is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  113.00  in Karolinska Development AB on September 12, 2024 and sell it today you would lose (2.00) from holding Karolinska Development AB or give up 1.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Ford Motor  vs.  Karolinska Development AB

Ford Motor

Risk-Adjusted Performance

0 of 100

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.

Karolinska Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Karolinska Development AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ford and Karolinska Development

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

The idea behind Ford Motor and Karolinska Development AB 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.