Correlation Between Ford and Shapir Engineering

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

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

Diversification Opportunities for Ford and Shapir Engineering

-0.21

Correlation Coefficient

Ford  Shapir Engineering

Very good diversification

The 3 months correlation between Ford and Shapir is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Shapir Engineering Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shapir Engineering 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 Shapir Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shapir Engineering has no effect on the direction of Ford i.e., Ford and Shapir Engineering go up and down completely randomly.

Pair Corralation between Ford and Shapir Engineering

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Shapir Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.49 times less risky than Shapir Engineering. The stock trades about -0.48 of its potential returns per unit of risk. The Shapir Engineering Industry is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  262,000  in Shapir Engineering Industry on September 24, 2024 and sell it today you would earn a total of  24,300  from holding Shapir Engineering Industry or generate 9.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

Ford Motor  vs.  Shapir Engineering Industry

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.

Shapir Engineering

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shapir Engineering Industry are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shapir Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Shapir Engineering

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

The idea behind Ford Motor and Shapir Engineering Industry 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.