Correlation Between Ford and GROUP

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Can any of the company-specific risk be diversified away by investing in both Ford and GROUP 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 GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and GROUP 1 AUTOMOTIVE, you can compare the effects of market volatilities on Ford and GROUP 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 GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and GROUP.

Diversification Opportunities for Ford and GROUP

-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between Ford and GROUP is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and GROUP 1 AUTOMOTIVE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GROUP 1 AUTOMOTIVE 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 GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GROUP 1 AUTOMOTIVE has no effect on the direction of Ford i.e., Ford and GROUP go up and down completely randomly.

Pair Corralation between Ford and GROUP

Taking into account the 90-day investment horizon Ford Motor is expected to generate 3.95 times more return on investment than GROUP. However, Ford is 3.95 times more volatile than GROUP 1 AUTOMOTIVE. It trades about 0.0 of its potential returns per unit of risk. GROUP 1 AUTOMOTIVE is currently generating about -0.21 per unit of risk. If you would invest  1,122  in Ford Motor on August 28, 2024 and sell it today you would lose (12.00) from holding Ford Motor or give up 1.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy90.91%
ValuesDaily Returns

Ford Motor  vs.  GROUP 1 AUTOMOTIVE

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) 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.
GROUP 1 AUTOMOTIVE 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days GROUP 1 AUTOMOTIVE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GROUP is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Ford and GROUP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and GROUP

The main advantage of trading using opposite Ford and GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, GROUP 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 GROUP will offset losses from the drop in GROUP's long position.
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The idea behind Ford Motor and GROUP 1 AUTOMOTIVE 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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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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