Correlation Between Ferrari NV and Ford

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

Diversification Opportunities for Ferrari NV and Ford

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between Ferrari and Ford is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ferrari NV and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Ferrari NV 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 Ferrari NV 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 Ferrari NV i.e., Ferrari NV and Ford go up and down completely randomly.

Pair Corralation between Ferrari NV and Ford

Given the investment horizon of 90 days Ferrari NV is expected to generate 0.71 times more return on investment than Ford. However, Ferrari NV is 1.41 times less risky than Ford. It trades about 0.08 of its potential returns per unit of risk. Ford Motor is currently generating about 0.0 per unit of risk. If you would invest  25,925  in Ferrari NV on November 9, 2024 and sell it today you would earn a total of  20,231  from holding Ferrari NV or generate 78.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Ferrari NV  vs.  Ford Motor

 Performance 
       Timeline  
Ferrari NV 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ferrari NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Ferrari NV is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
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.

Ferrari NV and Ford Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ferrari NV and Ford

The main advantage of trading using opposite Ferrari NV and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrari NV 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.
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The idea behind Ferrari NV 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.
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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