Correlation Between Ford and Energisa

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

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

Diversification Opportunities for Ford and Energisa

0.0

Correlation Coefficient

Ford  Energisa

Pay attention - limited upside

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

Pair Corralation between Ford and Energisa

If you would invest (100.00) in Ford Motor on March 15, 2024 and sell it today you would earn a total of  100.00  from holding Ford Motor or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Ford Motor  vs.  Energisa SA

Ford Motor

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ford is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Energisa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energisa SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Energisa is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Energisa

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

The idea behind Ford Motor and Energisa SA 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.