Correlation Between Mazda and Ford
Can any of the company-specific risk be diversified away by investing in both Mazda and Ford 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 Mazda and Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mazda Motor and Ford Motor, you can compare the effects of market volatilities on Mazda and Ford 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 Mazda with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mazda and Ford.
Diversification Opportunities for Mazda and Ford
Good diversification
The 3 months correlation between Mazda and Ford is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Mazda Motor and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Mazda 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 Mazda Motor are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Mazda i.e., Mazda and Ford go up and down completely randomly.
Pair Corralation between Mazda and Ford
Assuming the 90 days horizon Mazda Motor is expected to under-perform the Ford. In addition to that, Mazda is 1.04 times more volatile than Ford Motor. It trades about -0.01 of its total potential returns per unit of risk. Ford Motor is currently generating about 0.0 per unit of volatility. If you would invest 1,091 in Ford Motor on August 24, 2024 and sell it today you would lose (11.00) from holding Ford Motor or give up 1.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Mazda Motor vs. Ford Motor
Performance |
| Timeline |
| Mazda Motor |
| Ford Motor |
Mazda and Ford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mazda and Ford
The main advantage of trading using opposite Mazda and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mazda position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.The idea behind Mazda Motor and Ford Motor 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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