Correlation Between Ford and VOC Energy

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

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

Diversification Opportunities for Ford and VOC Energy

-0.44

Correlation Coefficient

Ford  VOC Energy

Very good diversification

The 3 months correlation between Ford and VOC is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and VOC Energy Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOC Energy Trust 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 VOC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOC Energy Trust has no effect on the direction of Ford i.e., Ford and VOC Energy go up and down completely randomly.

Pair Corralation between Ford and VOC Energy

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.38 times more return on investment than VOC Energy. However, Ford is 1.38 times more volatile than VOC Energy Trust. It trades about -0.15 of its potential returns per unit of risk. VOC Energy Trust is currently generating about -0.31 per unit of risk. If you would invest  1,328  in Ford Motor on February 2, 2024 and sell it today you would lose (108.00) from holding Ford Motor or give up 8.13% of portfolio value over 90 days.

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

Ford Motor  vs.  VOC Energy Trust

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.

VOC Energy Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VOC Energy Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ford and VOC Energy

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

The idea behind Ford Motor and VOC Energy Trust 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.