Correlation Between Ford and Navistar International

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

Diversification Opportunities for Ford and Navistar International

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Ford and Navistar is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Navistar International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navistar International 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 Navistar International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navistar International has no effect on the direction of Ford i.e., Ford and Navistar International go up and down completely randomly.

Pair Corralation between Ford and Navistar International

If you would invest  1,312  in Ford Motor on December 30, 2023 and sell it today you would earn a total of  16.00  from holding Ford Motor or generate 1.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Ford Motor  vs.  Navistar International

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Ford reported solid returns over the last few months and may actually be approaching a breakup point.
Navistar International 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Navistar International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Navistar International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Ford and Navistar International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Navistar International

The main advantage of trading using opposite Ford and Navistar International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Navistar International 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 Navistar International will offset losses from the drop in Navistar International's long position.
The idea behind Ford Motor and Navistar International 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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