Correlation Between Ford and SandRidge Energy

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

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

Diversification Opportunities for Ford and SandRidge Energy

0.01

Correlation Coefficient

Ford  SandRidge Energy

Significant diversification

The 3 months correlation between Ford and SandRidge is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and SandRidge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SandRidge Energy 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 SandRidge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SandRidge Energy has no effect on the direction of Ford i.e., Ford and SandRidge Energy go up and down completely randomly.

Pair Corralation between Ford and SandRidge Energy

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.06 times more return on investment than SandRidge Energy. However, Ford is 1.06 times more volatile than SandRidge Energy. It trades about 0.03 of its potential returns per unit of risk. SandRidge Energy is currently generating about -0.07 per unit of risk. If you would invest  1,083  in Ford Motor on September 2, 2024 and sell it today you would earn a total of  30.00  from holding Ford Motor or generate 2.77% return on investment over 90 days.

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

Ford Motor  vs.  SandRidge Energy

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

SandRidge Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SandRidge Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ford and SandRidge Energy

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

The idea behind Ford Motor and SandRidge Energy 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.