Correlation Between Ford and BankInvest Lange

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

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

Diversification Opportunities for Ford and BankInvest Lange

0.49

Correlation Coefficient

Ford  BankInvest Lange

Very weak diversification

The 3 months correlation between Ford and BankInvest is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BankInvest Lange Danske in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankInvest Lange Danske 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 BankInvest Lange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankInvest Lange Danske has no effect on the direction of Ford i.e., Ford and BankInvest Lange go up and down completely randomly.

Pair Corralation between Ford and BankInvest Lange

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the BankInvest Lange. In addition to that, Ford is 7.13 times more volatile than BankInvest Lange Danske. It trades about -0.12 of its total potential returns per unit of risk. BankInvest Lange Danske is currently generating about -0.05 per unit of volatility. If you would invest  8,506  in BankInvest Lange Danske on January 20, 2024 and sell it today you would lose (28.00) from holding BankInvest Lange Danske or give up 0.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

Ford Motor  vs.  BankInvest Lange Danske

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.

BankInvest Lange Danske

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BankInvest Lange Danske has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong fundamental indicators, BankInvest Lange is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and BankInvest Lange

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

The idea behind Ford Motor and BankInvest Lange Danske 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.