Correlation Between Ford and Small-cap Profund

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

Diversification Opportunities for Ford and Small-cap Profund

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ford and Small-cap is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Small Cap Profund Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Profund 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 Small-cap Profund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Profund has no effect on the direction of Ford i.e., Ford and Small-cap Profund go up and down completely randomly.

Pair Corralation between Ford and Small-cap Profund

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.66 times more return on investment than Small-cap Profund. However, Ford is 1.66 times more volatile than Small Cap Profund Small Cap. It trades about 0.16 of its potential returns per unit of risk. Small Cap Profund Small Cap is currently generating about 0.16 per unit of risk. If you would invest  965.00  in Ford Motor on November 2, 2024 and sell it today you would earn a total of  51.00  from holding Ford Motor or generate 5.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Small Cap Profund Small Cap

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Small Cap Profund 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Profund Small Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Small-cap Profund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ford and Small-cap Profund Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Small-cap Profund

The main advantage of trading using opposite Ford and Small-cap Profund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Small-cap Profund 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 Small-cap Profund will offset losses from the drop in Small-cap Profund's long position.
The idea behind Ford Motor and Small Cap Profund Small Cap 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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