Correlation Between Ford and Urban Gro

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

Diversification Opportunities for Ford and Urban Gro

-0.13
  Correlation Coefficient

Good diversification

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

Pair Corralation between Ford and Urban Gro

Taking into account the 90-day investment horizon Ford is expected to generate 1.76 times less return on investment than Urban Gro. But when comparing it to its historical volatility, Ford Motor is 2.76 times less risky than Urban Gro. It trades about 0.01 of its potential returns per unit of risk. Urban Gro is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  290.00  in Urban Gro on August 31, 2024 and sell it today you would lose (139.00) from holding Urban Gro or give up 47.93% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Urban Gro

 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.
Urban Gro 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Urban Gro are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Urban Gro displayed solid returns over the last few months and may actually be approaching a breakup point.

Ford and Urban Gro Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Urban Gro

The main advantage of trading using opposite Ford and Urban Gro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Urban Gro 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 Urban Gro will offset losses from the drop in Urban Gro's long position.
The idea behind Ford Motor and Urban Gro 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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