Correlation Between Ford and Shemen Industries

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

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

Diversification Opportunities for Ford and Shemen Industries

-0.54

Correlation Coefficient

Ford  Shemen Industries

Excellent diversification

The 3 months correlation between Ford and Shemen is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Shemen Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shemen Industries 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 Shemen Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shemen Industries has no effect on the direction of Ford i.e., Ford and Shemen Industries go up and down completely randomly.

Pair Corralation between Ford and Shemen Industries

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Shemen Industries. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.35 times less risky than Shemen Industries. The stock trades about -0.02 of its potential returns per unit of risk. The Shemen Industries is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  131,400  in Shemen Industries on September 29, 2024 and sell it today you would earn a total of  47,900  from holding Shemen Industries or generate 36.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	74.6%
Values	Daily Returns

Ford Motor  vs.  Shemen Industries

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.

Shemen Industries

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shemen Industries are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Shemen Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Shemen Industries

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

The idea behind Ford Motor and Shemen Industries 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.