Correlation Between Ford and Olav Thon

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

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

Diversification Opportunities for Ford and Olav Thon

-0.3

Correlation Coefficient

Ford  Olav Thon

Very good diversification

The 3 months correlation between Ford and Olav is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Olav Thon Eien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olav Thon Eien 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 Olav Thon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olav Thon Eien has no effect on the direction of Ford i.e., Ford and Olav Thon go up and down completely randomly.

Pair Corralation between Ford and Olav Thon

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Olav Thon. In addition to that, Ford is 2.5 times more volatile than Olav Thon Eien. It trades about -0.07 of its total potential returns per unit of risk. Olav Thon Eien is currently generating about -0.01 per unit of volatility. If you would invest  22,500  in Olav Thon Eien on September 20, 2024 and sell it today you would lose (200.00) from holding Olav Thon Eien or give up 0.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Ford Motor  vs.  Olav Thon Eien

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.

Olav Thon Eien

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Olav Thon Eien has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Olav Thon is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ford and Olav Thon

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

The idea behind Ford Motor and Olav Thon Eien 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.