Correlation Between Ford and VINACONEX MEC

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

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

Diversification Opportunities for Ford and VINACONEX MEC

0.33

Correlation Coefficient

Ford  VINACONEX MEC

Weak diversification

The 3 months correlation between Ford and VINACONEX is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and VINACONEX MEC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VINACONEX MEC 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 VINACONEX MEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VINACONEX MEC has no effect on the direction of Ford i.e., Ford and VINACONEX MEC go up and down completely randomly.

Pair Corralation between Ford and VINACONEX MEC

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the VINACONEX MEC. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 3.32 times less risky than VINACONEX MEC. The stock trades about -0.02 of its potential returns per unit of risk. The VINACONEX MEC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  760,000  in VINACONEX MEC on September 30, 2024 and sell it today you would earn a total of  70,000  from holding VINACONEX MEC or generate 9.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	82.81%
Values	Daily Returns

Ford Motor  vs.  VINACONEX MEC

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.

VINACONEX MEC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VINACONEX MEC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, VINACONEX MEC displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and VINACONEX MEC

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

The idea behind Ford Motor and VINACONEX MEC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.