Correlation Between Ford and Genesis Technology

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

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

Diversification Opportunities for Ford and Genesis Technology

0.74

Correlation Coefficient

Ford  Genesis Technology

Poor diversification

The 3 months correlation between Ford and Genesis is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Genesis Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesis Technology 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 Genesis Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesis Technology has no effect on the direction of Ford i.e., Ford and Genesis Technology go up and down completely randomly.

Pair Corralation between Ford and Genesis Technology

Taking into account the 90-day investment horizon Ford is expected to generate 2.39 times less return on investment than Genesis Technology. In addition to that, Ford is 1.12 times more volatile than Genesis Technology. It trades about 0.03 of its total potential returns per unit of risk. Genesis Technology is currently generating about 0.07 per unit of volatility. If you would invest  6,140  in Genesis Technology on January 20, 2024 and sell it today you would earn a total of  1,870  from holding Genesis Technology or generate 30.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.58%
Values	Daily Returns

Ford Motor  vs.  Genesis Technology

Ford Motor

Risk-Adjusted Performance

6 of 100

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 unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Genesis Technology

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Genesis Technology are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Genesis Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Genesis Technology

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

The idea behind Ford Motor and Genesis Technology 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.