Correlation Between Ford and Solution Financial

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

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

Diversification Opportunities for Ford and Solution Financial

-0.23

Correlation Coefficient

Ford  Solution Financial

Very good diversification

The 3 months correlation between Ford and Solution is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Ford i.e., Ford and Solution Financial go up and down completely randomly.

Pair Corralation between Ford and Solution Financial

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Solution Financial. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.3 times less risky than Solution Financial. The stock trades about -0.05 of its potential returns per unit of risk. The Solution Financial is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Solution Financial on September 21, 2024 and sell it today you would earn a total of  0.00  from holding Solution Financial or generate 0.0% return on investment over 90 days.

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

Ford Motor  vs.  Solution Financial

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.

Solution Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solution Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Solution Financial is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Solution Financial

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

The idea behind Ford Motor and Solution Financial 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.