Correlation Between Ford and First Eagle

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

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

Diversification Opportunities for Ford and First Eagle

0.71

Correlation Coefficient

Ford  First Eagle

Poor diversification

The 3 months correlation between Ford and First is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and First Eagle High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle High 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 First Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Eagle High has no effect on the direction of Ford i.e., Ford and First Eagle go up and down completely randomly.

Pair Corralation between Ford and First Eagle

Taking into account the 90-day investment horizon Ford Motor is expected to generate 9.04 times more return on investment than First Eagle. However, Ford is 9.04 times more volatile than First Eagle High. It trades about 0.03 of its potential returns per unit of risk. First Eagle High is currently generating about 0.12 per unit of risk. If you would invest  1,144  in Ford Motor on January 26, 2024 and sell it today you would earn a total of  151.00  from holding Ford Motor or generate 13.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  First Eagle High

Ford Motor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford reported solid returns over the last few months and may actually be approaching a breakup point.

First Eagle High

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Eagle High are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, First Eagle 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 First Eagle

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

The idea behind Ford Motor and First Eagle High 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.