Correlation Between Ford and American Tower

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

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

Diversification Opportunities for Ford and American Tower

0.03

Correlation Coefficient

Ford  American Tower

Significant diversification

The 3 months correlation between Ford and American is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and American Tower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Tower 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 American Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Tower has no effect on the direction of Ford i.e., Ford and American Tower go up and down completely randomly.

Pair Corralation between Ford and American Tower

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the American Tower. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.17 times less risky than American Tower. The stock trades about -0.04 of its potential returns per unit of risk. The American Tower is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,188  in American Tower on September 27, 2024 and sell it today you would lose (300.00) from holding American Tower or give up 5.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Ford Motor  vs.  American Tower

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.

American Tower

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Tower has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, American Tower is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and American Tower

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

The idea behind Ford Motor and American Tower 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.