Correlation Between Ford and Nhoa SA

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

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

Diversification Opportunities for Ford and Nhoa SA

0.45

Correlation Coefficient

Ford  Nhoa SA

Very weak diversification

The 3 months correlation between Ford and Nhoa is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Nhoa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nhoa SA 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 Nhoa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nhoa SA has no effect on the direction of Ford i.e., Ford and Nhoa SA go up and down completely randomly.

Pair Corralation between Ford and Nhoa SA

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Nhoa SA. In addition to that, Ford is 5.58 times more volatile than Nhoa SA. It trades about -0.03 of its total potential returns per unit of risk. Nhoa SA is currently generating about -0.1 per unit of volatility. If you would invest  126.00  in Nhoa SA on September 13, 2024 and sell it today you would lose (2.00) from holding Nhoa SA or give up 1.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

Ford Motor  vs.  Nhoa SA

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.

Nhoa SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nhoa SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nhoa SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Nhoa SA

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

The idea behind Ford Motor and Nhoa SA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.