Correlation Between Ford and Wealthsimple North

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

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

Diversification Opportunities for Ford and Wealthsimple North

0.45

Correlation Coefficient

Ford  Wealthsimple North

Very weak diversification

The 3 months correlation between Ford and Wealthsimple is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Wealthsimple North America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealthsimple North 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 Wealthsimple North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealthsimple North has no effect on the direction of Ford i.e., Ford and Wealthsimple North go up and down completely randomly.

Pair Corralation between Ford and Wealthsimple North

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Wealthsimple North. In addition to that, Ford is 3.67 times more volatile than Wealthsimple North America. It trades about -0.01 of its total potential returns per unit of risk. Wealthsimple North America is currently generating about 0.13 per unit of volatility. If you would invest  4,318  in Wealthsimple North America on September 14, 2024 and sell it today you would earn a total of  196.00  from holding Wealthsimple North America or generate 4.54% return on investment over 90 days.

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

Ford Motor  vs.  Wealthsimple North America

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Wealthsimple North

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wealthsimple North America are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Wealthsimple North 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 Wealthsimple North

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

The idea behind Ford Motor and Wealthsimple North America 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.