Correlation Between Ford and Shaniv

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

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

Diversification Opportunities for Ford and Shaniv

-0.38

Correlation Coefficient

Ford  Shaniv

Very good diversification

The 3 months correlation between Ford and Shaniv is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Shaniv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaniv 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 Shaniv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaniv has no effect on the direction of Ford i.e., Ford and Shaniv go up and down completely randomly.

Pair Corralation between Ford and Shaniv

Taking into account the 90-day investment horizon Ford is expected to generate 4.66 times less return on investment than Shaniv. In addition to that, Ford is 1.31 times more volatile than Shaniv. It trades about 0.01 of its total potential returns per unit of risk. Shaniv is currently generating about 0.03 per unit of volatility. If you would invest  35,466  in Shaniv on September 30, 2024 and sell it today you would earn a total of  6,304  from holding Shaniv or generate 17.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.87%
Values	Daily Returns

Ford Motor  vs.  Shaniv

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.

Shaniv

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shaniv are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaniv sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Shaniv

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

The idea behind Ford Motor and Shaniv 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.