Correlation Between NWTN and Ford

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

By analyzing existing cross correlation between NWTN Class B and Ford Motor, you can compare the effects of market volatilities on NWTN and Ford 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 NWTN with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of NWTN and Ford.

Diversification Opportunities for NWTN and Ford

0.47

Correlation Coefficient

NWTN  Ford

Very weak diversification

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

Pair Corralation between NWTN and Ford

Given the investment horizon of 90 days NWTN Class B is expected to generate 6.96 times more return on investment than Ford. However, NWTN is 6.96 times more volatile than Ford Motor. It trades about 0.18 of its potential returns per unit of risk. Ford Motor is currently generating about 0.25 per unit of risk. If you would invest  85.00  in NWTN Class B on September 2, 2024 and sell it today you would earn a total of  35.00  from holding NWTN Class B or generate 41.18% return on investment over 90 days.

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

NWTN Class B  vs.  Ford Motor

NWTN Class B

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NWTN Class B are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, NWTN displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with NWTN and Ford

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

The idea behind NWTN Class B and Ford Motor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.