Correlation Between Ford and Viet Nam

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

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

Diversification Opportunities for Ford and Viet Nam

-0.16

Correlation Coefficient

Ford  Viet Nam

Good diversification

The 3 months correlation between Ford and Viet is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Viet Nam Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viet Nam Construction 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 Viet Nam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viet Nam Construction has no effect on the direction of Ford i.e., Ford and Viet Nam go up and down completely randomly.

Pair Corralation between Ford and Viet Nam

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Viet Nam. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.16 times less risky than Viet Nam. The stock trades about -0.39 of its potential returns per unit of risk. The Viet Nam Construction is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  1,250,000  in Viet Nam Construction on September 23, 2024 and sell it today you would lose (50,000) from holding Viet Nam Construction or give up 4.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

Ford Motor  vs.  Viet Nam Construction

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.

Viet Nam Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viet Nam Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Viet Nam is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ford and Viet Nam

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

The idea behind Ford Motor and Viet Nam Construction 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.