Correlation Between Ford and Dover

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

Diversification Opportunities for Ford and Dover

FordDoverDiversified AwayFordDoverDiversified Away100%
0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between Ford and Dover is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Dover in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dover 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 Dover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dover has no effect on the direction of Ford i.e., Ford and Dover go up and down completely randomly.

Pair Corralation between Ford and Dover

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Dover. In addition to that, Ford is 1.6 times more volatile than Dover. It trades about -0.11 of its total potential returns per unit of risk. Dover is currently generating about 0.04 per unit of volatility. If you would invest  19,871  in Dover on November 25, 2024 and sell it today you would earn a total of  183.00  from holding Dover or generate 0.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Dover

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50
JavaScript chart by amCharts 3.21.15F DOV
       Timeline  
Ford Motor 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb99.51010.511
Dover 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Dover has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Dover is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb185190195200205210215220

Ford and Dover Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.09-2.32-1.54-0.76-0.01160.691.382.082.78 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15F DOV
       Returns  

Pair Trading with Ford and Dover

The main advantage of trading using opposite Ford and Dover positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Dover 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 Dover will offset losses from the drop in Dover's long position.
The idea behind Ford Motor and Dover 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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