Correlation Between Ford and Zeder Investments

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

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

Diversification Opportunities for Ford and Zeder Investments

-0.47

Correlation Coefficient

Ford  Zeder Investments

Very good diversification

The 3 months correlation between Ford and Zeder is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Zeder Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zeder Investments 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 Zeder Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zeder Investments has no effect on the direction of Ford i.e., Ford and Zeder Investments go up and down completely randomly.

Pair Corralation between Ford and Zeder Investments

Taking into account the 90-day investment horizon Ford is expected to generate 1.16 times less return on investment than Zeder Investments. But when comparing it to its historical volatility, Ford Motor is 1.08 times less risky than Zeder Investments. It trades about 0.01 of its potential returns per unit of risk. Zeder Investments is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  17,400  in Zeder Investments on September 1, 2024 and sell it today you would lose (400.00) from holding Zeder Investments or give up 2.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Ford Motor  vs.  Zeder Investments

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Zeder Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zeder Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ford and Zeder Investments

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

The idea behind Ford Motor and Zeder Investments 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.