Correlation Between Ford and Mfs Servative

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

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

Diversification Opportunities for Ford and Mfs Servative

0.25

Correlation Coefficient

Ford  Mfs Servative

Modest diversification

The 3 months correlation between Ford and Mfs is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mfs Servative Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Servative Allocation 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 Mfs Servative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Servative Allocation has no effect on the direction of Ford i.e., Ford and Mfs Servative go up and down completely randomly.

Pair Corralation between Ford and Mfs Servative

Taking into account the 90-day investment horizon Ford Motor is expected to generate 7.23 times more return on investment than Mfs Servative. However, Ford is 7.23 times more volatile than Mfs Servative Allocation. It trades about 0.03 of its potential returns per unit of risk. Mfs Servative Allocation is currently generating about 0.12 per unit of risk. If you would invest  1,083  in Ford Motor on September 2, 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Mfs Servative Allocation

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

Mfs Servative Allocation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Servative Allocation are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mfs Servative 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 Mfs Servative

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

The idea behind Ford Motor and Mfs Servative Allocation 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.