Correlation Between Ford and Mars Acquisition

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

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

Diversification Opportunities for Ford and Mars Acquisition

-0.4

Correlation Coefficient

Ford  Mars Acquisition

Very good diversification

The 3 months correlation between Ford and Mars is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mars Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mars Acquisition Corp 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 Mars Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mars Acquisition Corp has no effect on the direction of Ford i.e., Ford and Mars Acquisition go up and down completely randomly.

Pair Corralation between Ford and Mars Acquisition

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Mars Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 6.0 times less risky than Mars Acquisition. The stock trades about -0.02 of its potential returns per unit of risk. The Mars Acquisition Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Mars Acquisition Corp on September 28, 2024 and sell it today you would earn a total of  13.00  from holding Mars Acquisition Corp or generate 52.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	46.77%
Values	Daily Returns

Ford Motor  vs.  Mars Acquisition Corp

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.

Mars Acquisition Corp

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Mars Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively abnormal basic indicators, Mars Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Mars Acquisition

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

The idea behind Ford Motor and Mars Acquisition Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.