Correlation Between Ford and Jpmorgan Investor

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

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

Diversification Opportunities for Ford and Jpmorgan Investor

0.67

Correlation Coefficient

Ford  Jpmorgan Investor

Poor diversification

The 3 months correlation between Ford and Jpmorgan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Jpmorgan Investor Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Investor 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 Jpmorgan Investor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Investor has no effect on the direction of Ford i.e., Ford and Jpmorgan Investor go up and down completely randomly.

Pair Corralation between Ford and Jpmorgan Investor

Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.81 times more return on investment than Jpmorgan Investor. However, Ford is 3.81 times more volatile than Jpmorgan Investor Balanced. It trades about -0.02 of its potential returns per unit of risk. Jpmorgan Investor Balanced is currently generating about -0.11 per unit of risk. If you would invest  1,042  in Ford Motor on September 30, 2024 and sell it today you would lose (39.00) from holding Ford Motor or give up 3.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Jpmorgan Investor Balanced

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.

Jpmorgan Investor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jpmorgan Investor Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Jpmorgan Investor 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 Jpmorgan Investor

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

The idea behind Ford Motor and Jpmorgan Investor Balanced 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.