Correlation Between Ford and Virtus International

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

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

Diversification Opportunities for Ford and Virtus International

-0.41

Correlation Coefficient

Ford  Virtus International

Very good diversification

The 3 months correlation between Ford and Virtus is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Virtus International Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus International 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 Virtus International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus International has no effect on the direction of Ford i.e., Ford and Virtus International go up and down completely randomly.

Pair Corralation between Ford and Virtus International

Taking into account the 90-day investment horizon Ford is expected to generate 2.09 times less return on investment than Virtus International. In addition to that, Ford is 2.82 times more volatile than Virtus International Small Cap. It trades about 0.01 of its total potential returns per unit of risk. Virtus International Small Cap is currently generating about 0.06 per unit of volatility. If you would invest  1,619  in Virtus International Small Cap on September 7, 2024 and sell it today you would earn a total of  367.00  from holding Virtus International Small Cap or generate 22.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Virtus International Small Cap

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.

Virtus International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus International Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Virtus International 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 Virtus International

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

The idea behind Ford Motor and Virtus International Small Cap 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.