Correlation Between Ford and Reeds

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

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

Diversification Opportunities for Ford and Reeds

0.1

Correlation Coefficient

Ford  Reeds

Average diversification

The 3 months correlation between Ford and Reeds is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Reeds Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reeds Inc 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 Reeds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reeds Inc has no effect on the direction of Ford i.e., Ford and Reeds go up and down completely randomly.

Pair Corralation between Ford and Reeds

If you would invest  969.00  in Ford Motor on September 23, 2024 and sell it today you would earn a total of  19.00  from holding Ford Motor or generate 1.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.37%
Values	Daily Returns

Ford Motor  vs.  Reeds Inc

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.

Reeds Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reeds Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Reeds is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ford and Reeds

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

The idea behind Ford Motor and Reeds Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.