Correlation Between Ford and TRIMBLE

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

By analyzing existing cross correlation between Ford Motor and TRIMBLE INC 475, you can compare the effects of market volatilities on Ford and TRIMBLE 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 TRIMBLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and TRIMBLE.

Diversification Opportunities for Ford and TRIMBLE

0.55

Correlation Coefficient

Ford  TRIMBLE

Very weak diversification

The 3 months correlation between Ford and TRIMBLE is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and TRIMBLE INC 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRIMBLE INC 475 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 TRIMBLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRIMBLE INC 475 has no effect on the direction of Ford i.e., Ford and TRIMBLE go up and down completely randomly.

Pair Corralation between Ford and TRIMBLE

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the TRIMBLE. In addition to that, Ford is 1.0 times more volatile than TRIMBLE INC 475. It trades about -0.34 of its total potential returns per unit of risk. TRIMBLE INC 475 is currently generating about -0.07 per unit of volatility. If you would invest  9,999  in TRIMBLE INC 475 on September 28, 2024 and sell it today you would lose (31.00) from holding TRIMBLE INC 475 or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	14.29%
Values	Daily Returns

Ford Motor  vs.  TRIMBLE INC 475

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.

TRIMBLE INC 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRIMBLE INC 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TRIMBLE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and TRIMBLE

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

The idea behind Ford Motor and TRIMBLE INC 475 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.