Correlation Between Ford and LEGGETT

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

Diversification Opportunities for Ford and LEGGETT

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Ford and LEGGETT is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and LEGGETT PLATT INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGGETT PLATT INC 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 LEGGETT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEGGETT PLATT INC has no effect on the direction of Ford i.e., Ford and LEGGETT go up and down completely randomly.

Pair Corralation between Ford and LEGGETT

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the LEGGETT. In addition to that, Ford is 2.87 times more volatile than LEGGETT PLATT INC. It trades about -0.1 of its total potential returns per unit of risk. LEGGETT PLATT INC is currently generating about -0.15 per unit of volatility. If you would invest  9,530  in LEGGETT PLATT INC on November 29, 2024 and sell it today you would lose (224.00) from holding LEGGETT PLATT INC or give up 2.35% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  LEGGETT PLATT INC

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
LEGGETT PLATT INC 

Risk-Adjusted Performance

Very Weak

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

Ford and LEGGETT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and LEGGETT

The main advantage of trading using opposite Ford and LEGGETT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, LEGGETT 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 LEGGETT will offset losses from the drop in LEGGETT's long position.
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The idea behind Ford Motor and LEGGETT PLATT INC 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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