Correlation Between Ford and Santos
Can any of the company-specific risk be diversified away by investing in both Ford and Santos 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 Santos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Santos Ltd ADR, you can compare the effects of market volatilities on Ford and Santos 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 Santos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Santos.
Diversification Opportunities for Ford and Santos
Weak diversification
The 3 months correlation between Ford and Santos is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Santos Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos Ltd ADR 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 Santos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos Ltd ADR has no effect on the direction of Ford i.e., Ford and Santos go up and down completely randomly.
Pair Corralation between Ford and Santos
If you would invest 1,290 in Ford Motor on January 25, 2024 and sell it today you would earn a total of 1.00 from holding Ford Motor or generate 0.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
Ford Motor vs. Santos Ltd ADR
Performance |
| Timeline |
| Ford Motor |
| Santos Ltd ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ford and Santos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Santos
The main advantage of trading using opposite Ford and Santos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Santos 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 Santos will offset losses from the drop in Santos' long position.The idea behind Ford Motor and Santos Ltd ADR 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.| Santos vs. Aker BP ASA | Santos vs. Woodside Energy Group | Santos vs. APA Corporation | Santos vs. EQT Corporation |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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