Correlation Between Ford and Pacific Strategic

Can any of the company-specific risk be diversified away by investing in both Ford and Pacific Strategic 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 Pacific Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and Pacific Strategic Financial, you can compare the effects of market volatilities on Ford and Pacific Strategic 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 Pacific Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Pacific Strategic.

Diversification Opportunities for Ford and Pacific Strategic

-0.71

Correlation Coefficient

Ford  Pacific Strategic

Pay attention - limited upside

The 3 months correlation between Ford and Pacific is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Pacific Strategic Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Strategic 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 Pacific Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Strategic has no effect on the direction of Ford i.e., Ford and Pacific Strategic go up and down completely randomly.

Pair Corralation between Ford and Pacific Strategic

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Pacific Strategic. In addition to that, Ford is 2.46 times more volatile than Pacific Strategic Financial. It trades about -0.15 of its total potential returns per unit of risk. Pacific Strategic Financial is currently generating about 0.32 per unit of volatility. If you would invest  107,000  in Pacific Strategic Financial on February 1, 2024 and sell it today you would earn a total of  5,500  from holding Pacific Strategic Financial or generate 5.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	73.91%
Values	Daily Returns

Ford Motor  vs.  Pacific Strategic Financial

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) 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.

Pacific Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Strategic Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Ford and Pacific Strategic

The main advantage of trading using opposite Ford and Pacific Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Pacific Strategic 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 Pacific Strategic will offset losses from the drop in Pacific Strategic's long position.

The idea behind Ford Motor and Pacific Strategic Financial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.