Correlation Between Ford and 06406RAU1

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Can any of the company-specific risk be diversified away by investing in both Ford and 06406RAU1 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 06406RAU1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BK 165 14 JUL 28, you can compare the effects of market volatilities on Ford and 06406RAU1 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 06406RAU1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and 06406RAU1.

Diversification Opportunities for Ford and 06406RAU1

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between Ford and 06406RAU1 is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BK 165 14 JUL 28 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BK 165 14 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 06406RAU1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BK 165 14 has no effect on the direction of Ford i.e., Ford and 06406RAU1 go up and down completely randomly.

Pair Corralation between Ford and 06406RAU1

Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.21 times more return on investment than 06406RAU1. However, Ford is 3.21 times more volatile than BK 165 14 JUL 28. It trades about 0.22 of its potential returns per unit of risk. BK 165 14 JUL 28 is currently generating about -0.12 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
Accuracy75.0%
ValuesDaily Returns

Ford Motor  vs.  BK 165 14 JUL 28

 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.
BK 165 14 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BK 165 14 JUL 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 06406RAU1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ford and 06406RAU1 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and 06406RAU1

The main advantage of trading using opposite Ford and 06406RAU1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, 06406RAU1 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 06406RAU1 will offset losses from the drop in 06406RAU1's long position.
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The idea behind Ford Motor and BK 165 14 JUL 28 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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