Correlation Between Ford and Polaris Industries

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

Diversification Opportunities for Ford and Polaris Industries

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Ford and Polaris is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Polaris Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Industries 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 Polaris Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Industries has no effect on the direction of Ford i.e., Ford and Polaris Industries go up and down completely randomly.

Pair Corralation between Ford and Polaris Industries

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.21 times more return on investment than Polaris Industries. However, Ford is 1.21 times more volatile than Polaris Industries. It trades about 0.02 of its potential returns per unit of risk. Polaris Industries is currently generating about 0.01 per unit of risk. If you would invest  1,187  in Ford Motor on December 29, 2023 and sell it today you would earn a total of  119.00  from holding Ford Motor or generate 10.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.78%
ValuesDaily Returns

Ford Motor  vs.  Polaris Industries

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Polaris Industries 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Polaris Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting forward indicators, Polaris Industries may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Ford and Polaris Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Polaris Industries

The main advantage of trading using opposite Ford and Polaris Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Polaris Industries 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 Polaris Industries will offset losses from the drop in Polaris Industries' long position.
The idea behind Ford Motor and Polaris Industries 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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