Correlation Between Ford and Buriram Sugar

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

Diversification Opportunities for Ford and Buriram Sugar

0.01
  Correlation Coefficient

Significant diversification

The 3 months correlation between Ford and Buriram is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Buriram Sugar Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buriram Sugar Public 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 Buriram Sugar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buriram Sugar Public has no effect on the direction of Ford i.e., Ford and Buriram Sugar go up and down completely randomly.

Pair Corralation between Ford and Buriram Sugar

Taking into account the 90-day investment horizon Ford is expected to generate 1.19 times less return on investment than Buriram Sugar. In addition to that, Ford is 1.11 times more volatile than Buriram Sugar Public. It trades about 0.17 of its total potential returns per unit of risk. Buriram Sugar Public is currently generating about 0.23 per unit of volatility. If you would invest  438.00  in Buriram Sugar Public on August 31, 2024 and sell it today you would earn a total of  40.00  from holding Buriram Sugar Public or generate 9.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Buriram Sugar Public

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
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.
Buriram Sugar Public 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Buriram Sugar Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Buriram Sugar disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ford and Buriram Sugar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Buriram Sugar

The main advantage of trading using opposite Ford and Buriram Sugar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Buriram Sugar 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 Buriram Sugar will offset losses from the drop in Buriram Sugar's long position.
The idea behind Ford Motor and Buriram Sugar Public 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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