Correlation Between Ford and Mid Cap

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

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

Diversification Opportunities for Ford and Mid Cap

0.42

Correlation Coefficient

Ford  Mid Cap

Very weak diversification

The 3 months correlation between Ford and Mid is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Mid Cap Profund Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Profund 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Profund has no effect on the direction of Ford i.e., Ford and Mid Cap go up and down completely randomly.

Pair Corralation between Ford and Mid Cap

Taking into account the 90-day investment horizon Ford is expected to generate 2.17 times less return on investment than Mid Cap. In addition to that, Ford is 2.13 times more volatile than Mid Cap Profund Mid Cap. It trades about 0.01 of its total potential returns per unit of risk. Mid Cap Profund Mid Cap is currently generating about 0.05 per unit of volatility. If you would invest  7,761  in Mid Cap Profund Mid Cap on September 20, 2024 and sell it today you would earn a total of  1,904  from holding Mid Cap Profund Mid Cap or generate 24.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Ford Motor  vs.  Mid Cap Profund Mid Cap

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Mid Cap Profund

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Mid Cap Profund Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Mid Cap 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 Mid Cap

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

The idea behind Ford Motor and Mid Cap Profund Mid Cap 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.