Correlation Between Ford and Bain Capital

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

Diversification Opportunities for Ford and Bain Capital

-0.63
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Ford and Bain is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Bain Capital Specialty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bain Capital Specialty 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 Bain Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bain Capital Specialty has no effect on the direction of Ford i.e., Ford and Bain Capital go up and down completely randomly.

Pair Corralation between Ford and Bain Capital

Taking into account the 90-day investment horizon Ford is expected to generate 1.14 times less return on investment than Bain Capital. In addition to that, Ford is 1.4 times more volatile than Bain Capital Specialty. It trades about 0.19 of its total potential returns per unit of risk. Bain Capital Specialty is currently generating about 0.3 per unit of volatility. If you would invest  1,652  in Bain Capital Specialty on October 20, 2024 and sell it today you would earn a total of  87.00  from holding Bain Capital Specialty or generate 5.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Bain Capital Specialty

 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 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.
Bain Capital Specialty 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bain Capital Specialty are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Bain Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ford and Bain Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Bain Capital

The main advantage of trading using opposite Ford and Bain Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Bain Capital 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 Bain Capital will offset losses from the drop in Bain Capital's long position.
The idea behind Ford Motor and Bain Capital Specialty 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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