Correlation Between Ford and Invesco Summit

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

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

Diversification Opportunities for Ford and Invesco Summit

0.4

Correlation Coefficient

Ford  Invesco Summit

Very weak diversification

The 3 months correlation between Ford and Invesco is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Invesco Summit Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Summit 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 Invesco Summit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Summit has no effect on the direction of Ford i.e., Ford and Invesco Summit go up and down completely randomly.

Pair Corralation between Ford and Invesco Summit

Taking into account the 90-day investment horizon Ford is expected to generate 2.56 times less return on investment than Invesco Summit. In addition to that, Ford is 1.59 times more volatile than Invesco Summit Fund. It trades about 0.02 of its total potential returns per unit of risk. Invesco Summit Fund is currently generating about 0.09 per unit of volatility. If you would invest  2,478  in Invesco Summit Fund on February 19, 2024 and sell it today you would earn a total of  163.00  from holding Invesco Summit Fund or generate 6.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Invesco Summit Fund

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) 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.

Invesco Summit

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Summit Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Summit may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Ford and Invesco Summit

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

The idea behind Ford Motor and Invesco Summit Fund 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 Stocks Directory module to find actively traded stocks across global markets.