Correlation Between Ford and Deutsche Wohnen

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

Diversification Opportunities for Ford and Deutsche Wohnen

-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between Ford and Deutsche is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Deutsche Wohnen SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Wohnen SE 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 Deutsche Wohnen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Wohnen SE has no effect on the direction of Ford i.e., Ford and Deutsche Wohnen go up and down completely randomly.

Pair Corralation between Ford and Deutsche Wohnen

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.21 times more return on investment than Deutsche Wohnen. However, Ford is 1.21 times more volatile than Deutsche Wohnen SE. It trades about 0.22 of its potential returns per unit of risk. Deutsche Wohnen SE is currently generating about 0.22 per unit of risk. If you would invest  1,022  in Ford Motor on September 3, 2024 and sell it today you would earn a total of  91.00  from holding Ford Motor or generate 8.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

Ford Motor  vs.  Deutsche Wohnen SE

 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.
Deutsche Wohnen SE 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Wohnen SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Deutsche Wohnen exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ford and Deutsche Wohnen Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Deutsche Wohnen

The main advantage of trading using opposite Ford and Deutsche Wohnen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Deutsche Wohnen 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 Deutsche Wohnen will offset losses from the drop in Deutsche Wohnen's long position.
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The idea behind Ford Motor and Deutsche Wohnen SE 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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