Correlation Between Ford and Nahar Poly

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

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

Diversification Opportunities for Ford and Nahar Poly

0.15

Correlation Coefficient

Ford  Nahar Poly

Average diversification

The 3 months correlation between Ford and Nahar is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nahar Poly Films in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nahar Poly Films 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 Nahar Poly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nahar Poly Films has no effect on the direction of Ford i.e., Ford and Nahar Poly go up and down completely randomly.

Pair Corralation between Ford and Nahar Poly

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Nahar Poly. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.25 times less risky than Nahar Poly. The stock trades about 0.0 of its potential returns per unit of risk. The Nahar Poly Films is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  25,960  in Nahar Poly Films on September 13, 2024 and sell it today you would earn a total of  4,095  from holding Nahar Poly Films or generate 15.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Ford Motor  vs.  Nahar Poly Films

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.

Nahar Poly Films

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nahar Poly Films are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Nahar Poly displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Nahar Poly

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

The idea behind Ford Motor and Nahar Poly Films 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..