Correlation Between Ford and Superior Industries

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Can any of the company-specific risk be diversified away by investing in both Ford and Superior 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 Superior 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 Superior Industries International, you can compare the effects of market volatilities on Ford and Superior 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 Superior Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Superior Industries.

Diversification Opportunities for Ford and Superior Industries

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between Ford and Superior is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Superior Industries Internatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior 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 Superior Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Industries has no effect on the direction of Ford i.e., Ford and Superior Industries go up and down completely randomly.

Pair Corralation between Ford and Superior Industries

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.47 times more return on investment than Superior Industries. However, Ford Motor is 2.15 times less risky than Superior Industries. It trades about -0.5 of its potential returns per unit of risk. Superior Industries International is currently generating about -0.34 per unit of risk. If you would invest  1,140  in Ford Motor on September 24, 2024 and sell it today you would lose (152.00) from holding Ford Motor or give up 13.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Superior Industries Internatio

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

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Weak
 
Strong
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.
Superior Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Superior Industries International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Ford and Superior Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Superior Industries

The main advantage of trading using opposite Ford and Superior Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Superior 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 Superior Industries will offset losses from the drop in Superior Industries' long position.
The idea behind Ford Motor and Superior Industries International 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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