Correlation Between Ford and Suzano SA

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

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

Diversification Opportunities for Ford and Suzano SA

0.08

Correlation Coefficient

Ford  Suzano SA

Significant diversification

The 3 months correlation between Ford and Suzano is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Suzano SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzano SA 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 Suzano SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzano SA has no effect on the direction of Ford i.e., Ford and Suzano SA go up and down completely randomly.

Pair Corralation between Ford and Suzano SA

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Suzano SA. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.01 times less risky than Suzano SA. The stock trades about -0.31 of its potential returns per unit of risk. The Suzano SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  952.00  in Suzano SA on September 19, 2024 and sell it today you would earn a total of  23.00  from holding Suzano SA or generate 2.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.3%
Values	Daily Returns

Ford Motor  vs.  Suzano SA

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.

Suzano SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Suzano SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Suzano SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Suzano SA

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

The idea behind Ford Motor and Suzano SA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..