Correlation Between Ford and Entergy New

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

Diversification Opportunities for Ford and Entergy New

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between Ford and Entergy is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Entergy New Orleans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy New Orleans 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 Entergy New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy New Orleans has no effect on the direction of Ford i.e., Ford and Entergy New go up and down completely randomly.

Pair Corralation between Ford and Entergy New

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Entergy New. In addition to that, Ford is 2.87 times more volatile than Entergy New Orleans. It trades about 0.0 of its total potential returns per unit of risk. Entergy New Orleans is currently generating about 0.02 per unit of volatility. If you would invest  2,228  in Entergy New Orleans on August 31, 2024 and sell it today you would earn a total of  98.00  from holding Entergy New Orleans or generate 4.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Entergy New Orleans

 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.
Entergy New Orleans 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Entergy New Orleans has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Entergy New is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Ford and Entergy New Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Entergy New

The main advantage of trading using opposite Ford and Entergy New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Entergy New 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 Entergy New will offset losses from the drop in Entergy New's long position.
The idea behind Ford Motor and Entergy New Orleans 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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