Correlation Between Ford and BAG Films

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Can any of the company-specific risk be diversified away by investing in both Ford and BAG Films 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 BAG Films into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BAG Films and, you can compare the effects of market volatilities on Ford and BAG Films 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 BAG Films. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BAG Films.

Diversification Opportunities for Ford and BAG Films

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Ford and BAG is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BAG Films and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAG Films 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 BAG Films. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAG Films has no effect on the direction of Ford i.e., Ford and BAG Films go up and down completely randomly.

Pair Corralation between Ford and BAG Films

Taking into account the 90-day investment horizon Ford Motor is expected to generate 0.51 times more return on investment than BAG Films. However, Ford Motor is 1.98 times less risky than BAG Films. It trades about -0.04 of its potential returns per unit of risk. BAG Films and is currently generating about -0.04 per unit of risk. If you would invest  1,083  in Ford Motor on October 18, 2024 and sell it today you would lose (88.00) from holding Ford Motor or give up 8.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  BAG Films and

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
BAG Films 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BAG Films and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Ford and BAG Films Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and BAG Films

The main advantage of trading using opposite Ford and BAG Films positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, BAG Films 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 BAG Films will offset losses from the drop in BAG Films' long position.
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The idea behind Ford Motor and BAG Films and 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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