Correlation Between Ford and SGF Capital

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

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

Diversification Opportunities for Ford and SGF Capital

-0.4

Correlation Coefficient

Ford  SGF Capital

Very good diversification

The 3 months correlation between Ford and SGF is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and SGF Capital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGF Capital Public 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 SGF Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGF Capital Public has no effect on the direction of Ford i.e., Ford and SGF Capital go up and down completely randomly.

Pair Corralation between Ford and SGF Capital

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the SGF Capital. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 28.41 times less risky than SGF Capital. The stock trades about 0.0 of its potential returns per unit of risk. The SGF Capital Public is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  43.00  in SGF Capital Public on September 13, 2024 and sell it today you would lose (19.00) from holding SGF Capital Public or give up 44.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Ford Motor  vs.  SGF Capital Public

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.

SGF Capital Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGF Capital Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Ford and SGF Capital

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

The idea behind Ford Motor and SGF Capital Public 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.