Correlation Between Ford and NR 21

Can any of the company-specific risk be diversified away by investing in both Ford and NR 21 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 NR 21 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and NR 21 SA, you can compare the effects of market volatilities on Ford and NR 21 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 NR 21. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and NR 21.

Diversification Opportunities for Ford and NR 21

0.35

Correlation Coefficient

Ford  NR 21

Weak diversification

The 3 months correlation between Ford and NR21 is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and NR 21 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NR 21 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 NR 21. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NR 21 SA has no effect on the direction of Ford i.e., Ford and NR 21 go up and down completely randomly.

Pair Corralation between Ford and NR 21

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.7 times more return on investment than NR 21. However, Ford Motor is 1.44 times less risky than NR 21. It trades about 0.0 of its potential returns per unit of risk. NR 21 SA is currently generating about -0.06 per unit of risk. If you would invest  1,133  in Ford Motor on September 26, 2024 and sell it today you would lose (131.00) from holding Ford Motor or give up 11.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.42%
Values	Daily Returns

Ford Motor  vs.  NR 21 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.

NR 21 SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NR 21 SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NR 21 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 NR 21

The main advantage of trading using opposite Ford and NR 21 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, NR 21 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 NR 21 will offset losses from the drop in NR 21's long position.

The idea behind Ford Motor and NR 21 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.